1

5/2/2020(JAE)

CLIMATECHANGE,SUSTAINABILITYAND

COMPETITIONLAW

SimonHolmes*

*Judge(‘member’)attheUK’sCompetitionAppealTribunal,legaladvisortotheenvironmentalNGO,ClientEarth,academicvisitoratthe

CentreforCompetitionLawandPolicy,OxfordUniversity,andNonGovernmentalAdvisortotheEuropeanCommissionforthe

InternationalCompetitionNetwork(‘ICN’).

(TheviewsexpressedherearepersonalandcannotbeattributedtoanyinstitutionwithwhichSimonisconnected)

TheauthorwouldliketothankArielEzerachi,JulianNowag,MichelleMeagher,GrantMurray,MikeWalker,MartijnSnoep,Vasslios

CopetinasandLucPeeperkornfortheirhelpfulcommentsonanearlierdraftofthisarticle.Moregenerally,thankstoeveryonewhosent

supportiveandencouragingemailsandtoallinthe‘InclusiveCompetitionForum’,‘WeareCompetition’atSciencePo,andtotheFair

TradeAdvocacygroupinBrussels.

Ifyouwouldliketosupportthoseofustryinginourownsmallwaytomakecompetitionlawless‘partoftheproblem’andmore‘partof

thesolution’dogetintouch(commentandfeedbackwelcome).Myemailaddressis:Eusebius.Holmes@icloud.com.

YoumayalsoliketojointheInclusiveCompetitionForum(ofwhichIamafoundermember).Thisisopentoanyonewithaninterestin

makingcompetitionlawandpolicymorerelevanttokeyenvironmental,economicandsocialissuesthatweface.

[www.inclusivecompetition.org]

2

ABSTRACT

ClimateChangeisanexistentialthreat.Competitionlawmustbepartofthesolutionand

notpartoftheproblem.ThispaperdrawsontheconstitutionalprovisionsoftheEU

treatiesandremarksbyleaderssuchasCommissionerVestagertoshowhowcompetition

lawneednotstandinthewayofurgentactionandco-operationbytheprivatesectorto

fightclimatechange.Italsoshowshowsustainabilityisrelevanttoboththeanalysisof

mergersanddominancecases.Itisacalltoupdateourthinking,ourguidelinesand,if

necessary,ourlaw.BasedonEUlawitcontainsideasthatcouldinspirechangesinother

jurisdictions.

3

I. INTRODUCTION

Wefacea‘climateemergency’inwhich‘businessasusual’isnotanoptionandinwhicha

rapidmovetomoresustainabledevelopmentisvital.Tragically,fearofcompetitionlawis

oftenperceivedtobeanobstacletomuchneededcollaborationbetweencompaniesthat

aimtopromotesuchsustainabledevelopment.Needthisbethecase?

Thispaperargues,no.

Competitionlawneednotbepartoftheproblemandcanbepartofthesolution.As

CommissionerVestagerputitatarecentconferenceinBrusselswheresherecognisedthe

needforcollaborationbetweencompaniesinthisarea:‘everyoneofus–including

competitionenforcers-willbecalledontomakeacontribution’.

The‘constitutional’provisionsoftheEUTreatiesrequiresustainabilityandenvironmental

protectiontobetakenintoaccountwhenimplementingalloftheEU’spoliciesand

activities.Weneedtogetawayfromarcaneandnarrowconcepts(suchasanarrowfocus

onshort-termpriceeffects)andgetbacktowhatthetreaties(andtheirequivalentsin

nationaljurisdictions)actuallysay.It’snotthelawthatneedstochangebutourapproachto

it.

Itishopedthatthispaperwillemboldenlegalandeconomicadvisors,andcompetition

enforcerstotakeamorerobustapproachandthusfacilitatemuchneededcollaborationto

tackleclimatechange.

ThepaperalsoconsidershowArticle102TFEUmightbeusedasa‘sword’totackle

sustainabilityissuesandhowsustainabilitymightprovidea‘shield’againstallegationsof

abuseunderArticle102.

Finally,itlooksathowenvironmentalandsustainabilityissuesshouldbetakenintoaccount

undertheEUMR-whetherasafactorleadingtoadealbeingclearedorblocked.In

particular,itsuggeststhatmoreusecouldbemadeofremediestodealwithharmscaused

byotherwiseefficiencyenhancingdeals.

Itconcludeswitheightconcreteproposalsto‘nudge’thecompetitionestablishmentinthis

direction.Ifjustsomeoftheseproposalswereadopted,thencompetitionlawneednotbe

partoftheproblemandcanbeverymuchpartofthesolution.

4

II. CLIMATECHANGE:THEMORALIMPERATIVE

It is increasinglyacceptedthatwefacea‘climateemergency’andthat‘businessasusual’ isnotan

option.Iamnotgoingtogointothescienceandevidenceforthisbutsimplytakethisasafactand

thestartingpoint formyanalysisof its implications for competition law.1Whathas thisgot todo

withcompetitionlaw?Well,verylittleandalot.

Alittleinthesensethatcompetitionlawisasmallpartofaverybigpicture.WhenIputoffalight,

cycleratherthandrive,oreatchickenratherthanbeef,Icanonlymakeaminutecontributiontothe

challengesweface.WhenwefocusonenergyinFrancesomewillsay,whataboutChina?Whenwe

lookattransportissues,somewillsayagricultureisabiggerissue.Andsoon,andsoon…

Andsotoowhenwelookatcompetitionlawmanysayitisnotapanaceaforalltheillsoftheworld

andthatwehaveothertools–mostobviouslyregulation.

Andallthesepeopleareright.

BUT, justbecausecompetition lawcan’tdoeverything, itdoesnotmeanthat itcan’tdoanything.

Notonlydowehavetostartsomewhere, Iarguethatwehaveamoral imperativetodoso inthe

case of climate change and to take action whenever and wherever we can – and that includes

competition law (ourownparticularniche).Thingsneed to changeand,asCommissionerVestager

helpfullyput itataconferenceinBrusselsoncompetitionlawandsustainability inOctober2019(

the ‘Brussels Sustainability Conference’),’every one of us-including competition enforcers-will be

calledontomakeacontributiontothatchange’.

And competition law does have a lot to do with climate change. At one level, it is part of the

capitalist system which is designed to use up more and more of the earth’s scarce resources,

producingmoreandmore‘stuff’thatwedonotneed.Itisnotmygoalinthispapertochallengethe

whole system: there are excellent works by both economists such as Kate Raworth (‘Doughnut

Economics’) or Tim Jackson (‘Prosperity without Growth’) and lawyers such asMichelleMeagher

(‘Competitioniskillingus’)whichdothat.2

However,wedonotneedtoattackthebasicprinciplesofcapitalismorcompetitionlawtoseethat

competition law is part of the problem. Themost obvious examples of this are where themost

effective (oronly)waytoachieveasustainabilitygoal is for firmstocollaborate.AsCommissioner

VestagersaidattheBrusselsSustainabilityConference,‘businesshasavitalroleinhelpingtocreate

1IfyouwouldliketoreadsomethingonClimatechange,howabout(1)MBerners-Lee,ThereisNoPlanetB(CambridgeUniversityPress,2019);(2)SLewisandMMaslin,TheHumanPlanet.HowweCreatedthe

Anthropocene(Pelican,2018),especiallyChapter11:’CanHomoDominatusBecomeWise?’;(3)NicholasStern,SternReviewontheEconomicsofClimateChange(October2006)<https://webarchive.nationalarchives.gov.uk/20100407172811/http://www.hm-treasury.gov.uk/stern_review_report.htm>accessed17January2020;(4)DWallace-Wells,TheUninhabitableEarth(AllenLane,2019).2KRaworth,DoughnutEconomics:SevenWaystoThinkLikea21

stCenturyEconomist(RandomHouseBusiness

Books,2017);TJackson,ProsperityWithoutGrowth,FoundationsfortheEconomyofTomorrow(Routledge,2016);MMeagher,CompetitionisKillingUs:HowBigBusinessisHarmingOurSocietyandPlanet-andWhat

ToDoAboutIt(PenguinPublishers,forthcoming-September2020).

5

markets that are sustainable inmany differentways ... and…sometimes business can respond to

thatdemand[formoresustainableproducts]evenbetter,iftheygettogether’.and.

This approach should also be attractive to governments looking to minimise the legislation and

regulation to which business is subject. As the UK competition authority has put it: ‘Agreements

betweenfirmsmaybeparticularlyappealingtopolicymakersastheymayhelpachievepolicygoals

withouttherequirementofgovernmentlegislationorexplicitregulation.Suchagreementshavethe

potential of allowing firms to pursue actions that securebeneficial environmental outcomes in as

efficientawayaspossible’3

Examplesofthisfrommyownexperienceinclude:

• Supermarketsdevelopingsystemstoincreaserecycling;

• Supplierslookingtoreducetheiruseofplastics/packaging;or

• Suppliersandretailerslookingtomakefishingmoresustainable.

Examplesfromthecasesinclude:

• Agreementstoreducecaremissions(seen34);

• Attemptstoencouragemoresustainablechickenproduction(n136);

• Agreementstoincreasethecollectionofplasticwaste(n34);and

• Agreementstoimprovetheefficiencyofwashingmachines(n48).

Sometimes these initiativeshavegoneaheadand/orbeenapproved.However, in themany cases

theyhaveeitherbeen:

- rejected(eg‘ChickenofTomorrow’seen136)

- notpursuedeither:

o afterconsiderationofthecompetitionlawrisks;or

o notevenconsideredforfearofthepotentialcompetitionrisks.

Indeed,onlyrecentlyIwasinvolvedwithavitalinitiativetopreventdepletionoffishstocksinoneof

theworld’smostimportantfishingareaswhichriskedbeingderailedasonemajorbuyerwasafraid

to sign up citing competition law risks. No wonder more and more of us are getting angry and

frustrated!

Often all that is needed is some robust advice. Sometimes this is available andhelps bring about

important change. A good example is an opinion given by a leading law firm for the Fair Wear

Foundation(‘FWF’).MembersoftheFWFwantedtointroducea‘livingwage’ensuringthatworkers

employed in theirgarment factorieswerepaidaminimumwagetomeetbasic livingneeds.Some

members expressed fears that competition law prevented them taking collaborative action to

introducethis(inotherwordstheyfearedthismightbeseenasabuyingcartel—andasabyobject

infringementofArticle101).Theopinionstatedclearly that ‘such fearsarebasedona theoretical

applicationofcompetition lawandwillnotberealised inpractice’andthatthe initiativecarrieda

3See:OFT-OECD,OFTContributiontotheOECDPolicyRoundtableonHorizontalAgreementsintheEnvironmentalContext2010(24November2011)<http://www.oecd.org/competition/cartels/49139867.pdf>accessed17January2020(‘2010OECDReport’).

6

lowriskofregulatoryaction’4Bravo!-moreofthisplease.Similarrobustadvicecan,andshould,be

given to allay concerns in relation to necessary collaborative action to address a range of

environmental and sustainability issues. It is incumbent on all competition lawyers (in house and

external),competitioneconomistsandcompetitionenforcerstogiveit.

Sadly, as CommissionerVestager said in her speech at theBrussels Sustainability Conference ‘the

legal profession has been too conservative’. Yes, indeed—and the same goes all too often for

competition economists and enforcers and for business which is generally too risk averse. As a

result,importantinitiativesthatcouldhelpcombatclimatechangearestifledorstillborn.5

Some issueswill bemore difficult than those referred to above (but not impossible to solve): eg

agreementstopayafairandsustainablepricetopoorfarmers.6

Othersshouldbeeasy:egagreementstofacilitaterecyclingofpackaging,etc

Theurgencyoftheclimatechangethreatmeansweneedtoreappraiseourapproachtoeverything.

A2010paperbytheUKcompetitionauthorityconcludedthat‘theadvantagesanddisadvantagesof

taking into accountwider environmental benefits are finely balanced’.7 In 2010 I would probably

have agreed, but, whatever the rights and wrongs of that conclusion in 2010, our current

appreciationofclimatechangemeansthatthat‘balance’haschangedsignificantly:thescaleshave

tilted.

Wemustputmoreweightonenvironmentalfactorsandmovethedialradically inthedirectionof

permitting arrangements that contribute to combatting climate change, in particular, and to

protectingtheenvironmentandsustainableproductioningeneral.ThisisconsideredinsectionV.

4ArnoldandPorterLLP,TheApplicationofEUCompetitionLawtotheAdoptionoftheLivingWageStandard

(LegalOpinionfortheFairWearFoundation)<https://api.fairwear.org/wp-content/uploads/2016/06/OpiniontoFWFTheApplicationofEUCompetitionLawtoFWFLivingWageStandardfinal1.pdf>accessed17January2020.5Manysharethisconcern.Eg,theCommitteeonEconomicandMonetaryAffairsoftheEuropeanParliament,Annual Report on Competition Policy 2018 (31 January 2018)<https://oeil.secure.europarl.europa.eu/oeil/popups/ficheprocedure.do?lang=en&reference=2018/2102(INI)>accessed17January2020(‘theParliamentaryReport’)notedthat‘thenarrowinterpretationofArticle101ofthe TFEU by the Commission’s horizontal guidelines has increasingly been considered an obstacle to thecollaborationofsmallermarketplayersfortheadoptionofhigherenvironmentalandsocialstandards’[48].SeealsoFairTradeFoundation,CompetitionLawandSustainability.AStudy into IndustryAttitudes towards

Multi-Stakeholder Collaboration in the UK Grocery Sector (Report) (February 2019),<https://www.fairtrade.org.uk/Download.ashx?id=%7BEE9F8B75-8FFA-4E38-B87B-82BBE23A3D7C%7D>accessed17January2020.Thisnotedthat:

• ‘market actors will not act unilaterally on sustainability issues due to a fear of competitivedisadvantagethatcouldresultfromanincreaseintheircostbase’.

• ‘fear of an unfavourable ruling under competition law is a deterrent to a significant number ofretailersfromcollaboratingonsustainability issues,particularlyonissuesof lowincomesandwagesinthesupplychain’.

• ‘there is likely to be direct, long-term consumer benefit from multi-stakeholder collaboration forsustainabilitypurposes,eg,byreducingtherisksofacollapseofproductionduetoextremeweather’.

6Butseethediscussionofprice(n35);seealsothediscussioninsectionVonusingArticle102asa‘sword’toattackunfairpurchaseprices.7Seep114ofthe2010OECDReport(n3).

7

Otherareaswherecompetitionlawmayberelevanttosustainabilityissuesincludetheapproachto

‘abuse’inArticle102casesandtheanalysisofmergers.ThesewillbeconsideredinsectionsVIand

VIIbelow. For reasonsof space, thispaperdoesnot cover the relationshipbetween sustainability

issues / climate change and either state aid and/or public procurement (although these are

importantissueswhichwouldmeritseparatepapersintheirownright).

At the Brussels Sustainability Conference Commissioner Vestager reiterated the Commission’s

‘commitment to sustainability’butacknowledged that ‘we’re stillworkingoutexactlywhathas to

change, tomake that promise a reality’ This paper is intended to help us work out what has to

changeand,evenmoreimportantly,whatcanbedonewithoutanychangetothelawitself-butto

ourapproachtoit.

Although this paper is based firmly on EU law and the constitutional requirement to take the

environmentandsustainabilityintoaccountincompetitionpolicy,itishopedthatmanyoftheideas

discussedherecanhelpinspirechangestotheapproachinotherjurisdictions(particularly,butnot

exclusively,thosemodelledonEUlaw).

III. MYAPPROACH

MyprimarygoalinthisarticleistolookatwhatcanandmustbedonewithinthecontextofEUlaw

asitis.

WhatdoImeanbythat?

Firstly, itmeansIamnot lookingathowthetreatiesshouldbechangedinthe lightoftheclimate

emergencyorsustainabilityconcerns(althoughthisissomethingthatmeritsurgentattention).

Secondly, I amgoing beyond the law as it has been appliedby various competition authorities in

recentyears (andeventhecourts).This isa freedomInowhaveasanacademicand(toacertain

extent)asajudge.

As a lawyer practising competition law for 35 years, I had to advise clients based on the likely

attitude of the competition authorities and help them carry out a risk assessment.While I often

encouraged them not to be too risk averse, my professional duties still obliged me to take full

accountofrecentdecisionsoftheauthoritiesandguidelines(evenifIfeltthesewerewrong).

NowIamabletostandbackandlookagainatwhatthetreatiesactuallysay.Ifwhatthecompetition

authorities are doing / saying (whether in decisions or in guidance) is not consistent with the

treaties, Iwillargue that theyare legallywrong. Ifmore thanoneapproach isconsistentwith the

treatiesthenwhattheauthoritiessaymaynotbeillegalbutIarguetheycan,andshould,adoptthe

interpretation that ismost favourable to theclimateemergencyand sustainability challenges that

weface.

8

WheretheCourtofJusticeoftheEuropeanUnion(‘CJEU’)takesaviewthatIdonotconsidertobe

consistentwiththetreatiesmypositionismorenuanced.Asajudge,ImustrespecttheCJEUasthe

ultimatearbitratorofEU law.Asanacademic, Iwouldargue that theCJEU iswrongandcan,and

should,changeitsview.

TheissuesinthispaperarealldiscussedonthebasisofmyreadingoftheEUtreatiesastheystand.

However, such is the importance of the climate emergency thatwe face that, if competition law

continuestobeabarriertourgentinitiativestocombatclimatechange,thenthelawshouldeither

be‘clarified’(egbymeansofCommissionguidanceorstatementsbycompetitionauthoritiesoftheir

enforcementprioritiesorprinciples);amendedwithinthescopeoftheexistingtreaties(egbymeans

of a block exemption); or (as a last resort) the treaties should be amended (eg to amend the

relationshipbetweentheenvironmental/sustainabilityprovisionsandthecompetitionprovisionsor

toaddspecificprovisionsdealingwithclimatechange).Thesepossibilitiesareconsideredfurther in

section1X.

Sowhatdothetreatiessay?Whatarethegoalsofcompetitionlaw?Andwhataretheimplications

for sustainability issues–particularly in theareaofagreementsbutalsoabuseofdominanceand

mergers?

IV. THE GOALS OF COMPETITION LAW AND THE

‘CONSTITUTIONAL’PROVISIONSOFTHETREATIES

The starting point for any analysis of the treaties should be what I term their ‘constitutional’

provisions–iethebitsatthebeginningthatexplainwhattheyareallabout.

Asapractitioner,ImustconfessIrarelylookedatthese.IjustreliedonwhatI‘knew’(orthoughtI

knew) to be the position from experience and from the Commission’s guidelines and decisions. I

couldhavetoldyouroughlywhatArticle2oftheTreatyofRomesaidbutunpromptedIwouldnot

havehadacluewhatArticle11of theTFEUsaid (and Isuspect Iwasnotalone inthis ignorance).

Well,Iwaswrong–solet’sputthatright.

IV.i.TreatyonEuropeanUnion–Article3

Article3oftheTreatyonEuropeanUnionsetsouttheEU’sobjectives:

Article3(1)

‘TheUnion’saimistopromotepeace,itsvaluesandthewell-beingofitspeoples’

Article3(3)

‘TheUnion…shallworkforthesustainabledevelopmentofEurope…andahighlevelofprotection

andimprovementofthequalityoftheenvironment’.

Article3(5)says:

9

‘itshallcontributeto…thesustainabledevelopmentoftheearth’andto‘freeandfairtrade’.

(emphasisadded)

Iacceptthatexactlywhat‘sustainable’or‘fair’meaninaparticularcontextcanbeverydifficult(and

I shall return to this issue later). However, I do not see how one can seriously argue that these

concepts are not relevant in applying the rest of the treaties (and that includes the competition

provisions).

Inmyview,readingtheseprovisionstogetherclearlyindicatesthatwherethereisaconflictbetween

sustainabilityandeconomicgoalstheproportionalityprincipleshouldbeapplied.

Furthermore, aswe shall see this is written into the competition provisions of the treaty –most

notablyinArticle101(3).And,beforeanyonesuggeststhisisalltoodifficult,andthereistoogreata

riskofinconsistentoutcomes(especiallyinadecentralisedsystem),thisisalsothecasewithnarrow

pricecentricso-called‘economic’considerations.WewillcomebacktothisinsectionVIII.

IV.ii.TheTreatyontheFunctioningoftheEuropeanUnion(‘TFEU’)

Articles7,9and11

Just incasetherewasanydoubtabouttheneedtobalancepotentiallyconflictinggoals, theTFEU

makesthisclear.

Article7says:

‘TheUnionshallensureconsistencybetweenitspoliciesandactivitiestakingallofitsobjectivesinto

account’.8

(emphasisadded)

Article9says:

‘In defining and implementing its policies and activities, the Union shall take into account … the

‘protectionofhumanhealth'.

(Whichissurelycapableoftakingintoaccounthavingenoughtoeatandproducingbasicfoodstuff

onasustainablebasis?)

Article11says:

8 The importance of this point is emphasised in paragraph 7 of the Parliamentary Report (n 3) which:‘underlinesthefactthatcompetitionrulesaretreatybasedand,asenshrinedinArticle7oftheTFEU,shouldbeseeninthelightofthewiderEuropeanvaluesunderpinningUnionlegislationregardingsocialaffairs,thesocialmarket economy, environmental standards, climate policy and consumer protection; takes the viewthattheapplicationofEUcompetitionlawshouldaddressallmarketdistortions, includingthosecreatedbynegativesocialandenvironmentalexternalities’.(emphasisadded).

10

‘Environmentalprotectionrequirementsmustbeintegratedintothedefinitionandinterpretationof

theUnionpoliciesandactivities,inparticularwithaviewtopromotingsustainabledevelopment’.

(emphasisadded)

Wheredoesitsay‘exceptwhenimplementingtheUnion’spoliciesoncompetition’?Nowhere–and

it is not even optional: environmental consideration ‘must’ be taken into account when

implementingalloftheEU’spoliciesandactivities.9

EUCharteronFundamentalRights–Article37

Article37says:

‘Ahighlevelofenvironmentalprotectionandimprovementofthequalityoftheenvironmentmust

be integrated into the policies of the Union and ensured in accordance with the principle of

sustainabledevelopment’.(emphasisadded)

Failureby thecompetitionestablishment to focuson the ‘constitutional’provisionsof the treaties

reflectsafailuretonote,andtakeproperaccountof,themovefromamere‘EconomicCommunity’

(under the EEC or European Economic Community) to themuch broader concept of a European

‘union’with theestablishmentof theEuropeanUnionon1November1993–andeverythingthat

thisentailsforawiderangeofsocial,political,economicandsustainabilitygoals.10

While environmental and sustainability considerations must be taken into account inapplyingthetreatiesasawhole(andthecompetitionprovisions,inparticular)asamatterof law,theexistential threatthatclimatechangeposesforhumanity, introducesafurtherdimension–amoralimperativetotakethemintoaccounttothefullestextentthatislegallypossible.

Logically I would now turn to interpreting the competition law provisions in the light of these

‘constitutional’provisions.Unfortunately,Ifeelobligedtotakeadetourdowntheroadthatmuchof

the competition establishment has taken over the last 30 years or so – the so-called ‘consumer

welfare’detour11.

9ThiswasexplicitlyagreedbytheMemberStateswhendraftingArticle11:theword‘all’wasunderlinedinthedrafttext,see:JulianNowag,‘TheSkyistheLimit.OntheDraftingofArticle11TFEU’sIntegrationObligationsanditsIntendedReach’inSSjafjellandAWiesbrock(eds)TheGreeningofEuropeanBusinessUnderEULaw:Taking Article 11 TFEU Seriously (Routledge, 2014); While environmental and sustainability considerationsmustbetakenintoaccountinapplyingthetreatiesasawhole(andthecompetitionprovisions,inparticular)as a matter of law, the existential threat that climate change poses for humanity, introduces a furtherdimension–amoralimperativetotakethemintoaccounttothefullestextentthatislegallypossible.10TheMaastrichtTreatyof1992reinforcedearlierprovisionsonenvironmentalprotection(inthe1986‘SingleEuropeanAct’)sayingthatthese‘must’beintegratedintotheEUpolicies(ratherthanjustbea‘component’ofthem).TheAmsterdamTreatyof1999furtherstrengthenedthisexplicitlymakingthisprovisionapplicableinallareasofEUlawandaction(includingpolicy-making,regulations,directivesanddecisions)andintroducingthelinkagebetweenenvironmentalprotectionandsustainabledevelopment(whichisnowreflectedinArticle11TFEU).11AsCommissionerNeelieKroesputitinaspeechin2005(NeelieKroes,‘EuropeanCompetitionPolicy–DeliveringBetterMarketsandBetterChoices’(Speech,EuropeanConsumerandCompetitionDay,London,15September2015),<https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_05_512>accessed17

11

IV.iii.THECONSUMERWELFAREDETOUR

First,aquestion:wheredoesthistermappearineithertheconstitutionalorcompetitionprovisions

ofthetreaties?Answer:nowhere

At this point, I couldwrite a lot about the ‘Chicago’ school, neo-liberalism, etc – but others have

donethiseloquently.12

Iwill,however,maketwopoints.

Firstly, there is no basis for the adoption of a narrow ‘consumer welfare’ test anywhere in the

Treaties–andthereforeinEUlaw(ortheanalogousnationalcompetitionregimesinEurope).

Secondly, if consumerwelfarewere the correct legal standard, then itwould not be a badone if

lookedatafresh.Thisinvitestwoquestions:whatisa‘consumer’andwhatis‘welfare’?Thefirstof

thesequestionsisdiscussedindetail insectionV.iv.,2ndCondition(‘FairShareforConsumers’).So

whatismeantby‘welfare’?

Whichbitof theword ‘welfare’dosome lawyers,economists,academicsandcompetitionofficials

not‘get’?

A quick google of the meaning of the term ‘welfare’ tells us that welfare is about ‘the health,

happinessandfuturesofapersonorgroup’.Amongstotherthingsitissynonymouswith‘well-being

andgoodhealth’(‘bonheur’;‘comfort’;‘bien-être’).Itisnotjustabout‘profit’or‘fortune’.

This is entirely consistent with Article 3(1) of the TFEU which says that the ‘Union’s aim is to

promote…thewell-beingofitspeoples’.

Theseconceptsseemcapableofencompassingconcernssuchas:

*havingenoughfoodtoeat;

*havingcleanairtobreathe;and

*producinggoodsusingfewerresources.

Inotherwords,theyinviteconsiderationofsustainabilityissuesatleastasmuchasnarrowfinancial

considerations13.

January2020):‘ConsumerwelfareisnowwellestablishedasthestandardtheCommissionapplieswhenassessingmergersandinfringementsoftheTreatyrulesoncartelsandmonopolies.Ouraimissimple:toprotectcompetitioninthemarketasameansofenhancingconsumerwelfareandensuringanefficientallocationofresources’,yes,butjustfinancialwelfare?Efficiencywhateverthecost?.12Mostleadingtextbooksincludeadiscussionofthegoalsofcompetitionlaw.See,egRWhishandDBailey,Competition Law (9th edition, Oxford University Press, 2018), 18-24; For a classic exposition of the ChicagoSchool of competition theory see RH Bork,The Antitrust Paradox: a Policy atWarWith Itself (Basic Books,1978);Borkreferstoarevolutioninantitrustlawthattransformeditfroma‘socialpolicy’to‘merelylaw’;Foramore recent discussion, see Ariel Ezerachi, ‘Sponge’, (2017) 5 JAE 49-75, and Ariel Ezerachi andMauriceStucke,‘TheFightOverAntitrust’sSoul’,(2017)9JournalofEuropeanCompetitionLaw&Practice1-2.13Onewayofdoingthisistotakeaccountofso-called‘externalities’whenapplyinganysortof‘welfare’standard(n31),(n133)andsectionVIII.vii.

12

SowhyhavewelettheChicagoSchooltakeusdownaroadwhereitsometimesseemsasiftheonly

thingsthatmatterareshort-termpriceeffects?14

As Thomas Horton has put it, this approach is in danger of turning us into ‘moral zombies and

economicsociopaths’making‘decisionsinamoralvacuum’15.

Ifthelawrequiredthis,thatwouldbebadenough.Buttoadoptthisapproachwhenthelawdoes

notrequireitismorallyreprehensible16.

LiketheEmperorNero,wearefiddlingwhileRomeisburning.Wearesquabblingovertechnocratic

issueswhileclimatechangegathersfrighteningmomentum.

Beforeturningbacktotheroad leadingtoaproper interpretationof thegoalsofcompetition law

andinterpretationofthecompetitionprovisionsofthetreaty,itisworthnotingthreepoints:

Firstly,itisinterestingthatanaturalreadingoftheword‘welfare’fitsverywellwithboth:

a) TheSustainableDevelopmentGoals(‘SDGs’)17thirdgoal:‘GoodHealthandWell-being’;and

b) Emergingconceptsofmeasuresofnationalwell-being(suchas‘happiness’)insteadof,oras

acomplementto,GDP.

To the extent competition law allows us (and it does) itmakes sense to interpret it in amanner

consistentwiththeSDGs,towhichwehavesignedupandinlinewiththemoreprogressivethinking

ontheeconomyasawhole.18

Secondly, a fresh look at the term ‘welfare’ avoids getting hung up over false choices between

seeminglycontrastingapproaches:egbetweenconsumerwelfare,ontheonehand,and‘fairness’;

‘well-being’;orpublicinterest/publicpolicyconsiderationsontheother.19

14Whenpressed,mosteconomistswoulddenythatconsumerwelfareisjustaboutshort-termpriceeffects,orevenprimarilyaboutit,andwouldacceptthatdynamicissuesaremoreimportant.Sadly,inpractice,oneoftengetstheimpressionthateitheronlyshort-termpriceeffectshavebeentakenintoaccountorthattheyaretheonlyfactorstowhichanyweighthasbeengiven.Thismaysimplyreflectareluctancetogiveweighttofactorsperceived(oftenwrongly)tobelesspredictable-andcertainlyatendencytogiveexcessiveweighttowhatiseasilymeasurable(n130).15ThomasJHorton, ‘FairnessandAntitrustReconsidered:AnEvolutionaryPerspective’,(2014)44McGeorgeLawReview823-864.16MyfocusinthispaperisonthepositionunderEUlaw(and,indirectly,onthepositioninmostEUmemberstates).Thatsaid,justbecausethenarrowapproachto‘consumerwelfare’islargelyanimportfromtheUS,weshouldbecarefulnottomakethemistakeofassumingthatitissomehowmandatedbyUSlaw.MyunderstandingisthatthereisnomorereasonforanarrowfocusonconsumerwelfareunderUSlawthanunderEUlaw.ThisiswellillustratedbySandeepVaheesan’shelpfulpaper:SandeepVaheesan,‘TheprofoundNonsenseofConsumerWelfareAntitrust’,(2019)64TheAntitrustBulletin479-494;thisisnotaUSvEuropedebate—orshouldnotbe.17TheSustainableDevelopmentGoals (‘SDGs’)areacollectionof17globalgoalsagreedby theUNGeneralAssemblyin2015for2030.18Thereisaninterestingparallelhere.JustasRaworth(n2) arguesthatweshallbeagnosticaboutgrowth,andthatGDPshouldbeapossible incidentalby-productofthepursuitofwider[moresustainable]goals,sotoowriterslikeMauriceStuckearguethat‘consumersurplusshouldbeaby-productofacompetitiveprocessthat provides economic opportunity and freedom, Maurice Stucke, ‘Should Competition Policy PromoteHappiness?’,(2013)81FordhamLawReview2275-2645.

13

Thirdly,mycriticismofthenarrowpricecentreapproachto‘consumerwelfare’isnotacriticismof

economicsoreconomists(well,notallofthem).AsKateRaworth’s‘DoughnutEconomics’reminds

us,‘economics’originallymeantthe‘artofhouseholdmanagement’andthroughoutmostofhistory

the subject has been concernedwith broader social and political concerns (as the term ‘political

economy’ clearly suggests).20 The ‘neo-liberal’ approach with its narrower focus on financial

considerations(andinthecontextofcompetitioneconomics,short-termpriceeffects)isarelatively

newphenomenon.21

AsVaclarSmilhasputit:‘thefundamentalproblemisthateconomicshasbecomesodivorcedfrom

fundamentalreality…untileconomicsreturnstothephysicalrulesofhumanexistence,we’llalways

befloatingintheskyandtotallydetractedfromreality’22.Or,asDavidBlanchflower(aneconomist

advocatinganapproachtoeconomicsmoregroundedinreality)hasnotedmanyeconomistsrelyon

‘largelyuntestedtheoreticalmodelsthatamounttolittlemorethanmathematicalgames’.23Thisis

whatPaulRomer,aformerchiefeconomistattheWorldBank,hascalled‘mathiness—playingwith

regressiontogiveafalsesenseofprecision’Othersmightcallitalchaemy!

Meanwhiletheplanetcontinuestoheatup.

Preciselywhat shouldbe thegoalsof competitionpolicy is the subjectofextensive literatureand

endlessdebate.Whatisclear,however,isthatconsumerwelfare,inthenarrowsenseofconsumer

surplus, appearsnowhere in the treaties andatmost shouldonlybepart of amuchwider set of

goals focusing on both the competitive process and the core goals of the treaty set out above,

includingforpresentpurposes,sustainability.24

19See,eg,Horton(n15)andCristopherTownley,‘IsThere(Still)RoomforNon-EconomicArgumentsinArticle101TFEUCases?’(2012)<https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2162864>accessed17January2020.20See(n2);Foranaccountofhowtheoriginalandmoreholisticapproachtoeconomicshaschanged,seeJAldred,LicensetobeBad–HowEconomicsCorruptedUs(AllenLane,2019)egatChapter1.21OftentracedbacktotheMontPelerinSocietyinthelate1940s,MiltonFriedman,FriedrichHayekandrightwing free-market think-tanks such as theAmerican Enterprise Institute inWashington and the Institute forEconomicAffairsinLondon.22SeeVSmil,Growth:FromMicroorganismstoMegacities(MITPress,2019);--,‘TheLimitsofHumanity’,SpecialSerie,TheFinancialTimes(September14/152019),10.23DGBlanchflower,Notworking,WhereHaveAlltheGoodJobsGone?(PrincetonUniversityPress,2019).24Progressiveauthorshavearticulated this inslightlydiffering termsbut theseauthorswouldallagree thatthis goes beyondwhatMaurice Stucke calls the ‘mindless pursuit of accumulating cheap products’. Stuckefocuseson‘thehappinessliterature’and,whileacceptingthatthisdoesnotprovideananalyticalframeworkfor analysing routine antitrust issues he concludes that this ‘literature suggests that competition policy inindustrial wealthy countries would be more efficacious (in terms of increased well-being) in promotingeconomic,social,anddemocraticvalues,ratherthansimplypromotinganarrowlydefinedconsumerwelfareobjective’(n18);WhileStuckefocuseson‘happiness’andwell-being,others,suchasHorton,focuson‘fairness’concludingthat‘a workable antitrust fairness standard can be developed and applied’ (n 15). While not written intoCommissionguidelineshisworkfindsastrongechoinmultiplespeechesandpressreleasesbyCommissionerVestager.Afocusonfairness(at least intermsofoutcomes)alsohelpsensurethatthebusinesscommunityandthewiderpublicseesthecompetitionauthoritiesandtheirworkaslegitimate.Julian Nowag says ‘it would be a misunderstanding to see the requirement of Article 11 TFEU as makingsustainabilityagoalor,orevenaprimarygoal,ofcompetitionlaw’.Forhimitisakintotherightsofdefenceorotherfundamentalrights:somethingthatneedstobetakenintoaccount.Ihavenoviewseitherway.Formethe important thing is that sustainability is given due weight in the analysis in accordance with the law: JNowag; “Competition has a Sustainability Gap” (n25).). The European Commission in its 2004 Exemption

14

Rather than consider further the goals of competition in the abstract, I turn now inV. to amore

specific consideration of the competition provisions of the TFEU, particularly those dealing with

potentiallyanti-competitiveagreements(Article101)butalso, insectionVI.,withpotentialabuses

ofadominantposition(Article102)and,insectionVII.,withmergers(theEUMergerRegulation).In

sectionVIII.Iconsidersomeoftheobjectionsthathavebeenraisedtotakingenvironmentalissues

into account (‘Is it all too difficult’).Section IX. sets out some proposals for reform.

Guidelines says the ‘aimof the Community competition rules is to protect competition on themarket as ameansof enhancing consumerwelfare andof ensuring an efficient allocationof resources’ [35].Although Iwould object that consumer welfare is not in the treaties this seems reasonably workable so long as (a)‘consumerwelfare’isreadinitsnaturalmeaning(asdiscussedabove)and(b)theterm‘efficientallocationofresources’encompassessustainability(egtherenewabilityofthoseresources)asitwouldonanaturalreadingand,inparticular,wheninterpretedinthelightofthe‘constitutionalprovisions’consideredabove.

15

16

V. ARTICLE101.NEEDAGREEMENTSFORPROMOTING

SUSTAINABILITYBECAUGHTBYARTICLE101AND,IFTHEY

ARE,SHOULDTHEYBEEXEMPTED?

Inbroadterms,Article101(1)prohibitsanti-competitiveagreementsandArticle101(3)providesfor

themtobeexemptedifcertainconditionsaremet.

Anumberofexcellentarticlesandbookshavebeenwrittendiscussingthescopeoftheseprovisions

–inparticular,theextenttowhichso-called‘non-economic’or‘publicinterest’factorscanbetaken

into account (and a number of these specifically consider environmental issues and sustainability

agreements).25 These typically discuss the cases of the European Courts, the decisions of the

European Commission and various guidelines issued by the Commission (particularly the 2004

ExemptionGuidelinesandthe2010HorizontalGuidelines).26

Much of the debate is framed in terms of taking a narrow or wide view of competition law. For

example,CyrilRitter’spaperdiscusseswhethercompetitionlawshouldmerelyavoidconflictswith

other EU policies (a ‘minimalist view’) rather than be interpreted in a way that maximises the

objectives of those other EU policies (‘the maximalist view’). Similarly, Julian Nowag draws a

distinctionbetween:

a) preventingconflictsbetweenthepolicytobeintegrated(eghere,environmentalpolicy)and

the relevant sectoral policy (here, competition policy) – which he calls the ‘first form of

integration’;and

b) integrating the twobymeansofabalancingexercise–whichhecalls the ‘second formof

integration’.

He draws a further distinction between ‘supportive’ and ‘preventative’ integration. Supportive

integrationmeans applying the sectoral rules so as to allowmeasures that are beneficial for the

policy which is to be integrated (here, environmental policy). Preventative integration means

application of the sectoral rules (here, competition policy) to avoid harm to the policy to be

integrated(here,environmentalpolicy).27

25Somegoodexamplesinclude:IoannisLianos,‘PolycentricCompetitionLaw’,(2018)71CurrentLegalProblems161-213;SKingston,GreeningEUCompetitionLawandPolicy(CambridgeUniversityPress,2012);JulienNowag;“Environmentalintegrationincompetitionandfreemarketlaws”(OxfordUniversityPress,2016).Townley(n19);AlexandraTeorell,‘ACompany’sGuidetoEnvironmentalAction’(MaterThesis,LundUniversity2019);CyrilRitter,‘TheInterfacebetweenCompetitionandRegulationinEULaw’(unpublished);OrBrook,‘StrugglingwithArticle101(3)TFEU:DivergingApproachesoftheCommission,EUCourtsandFiveCompetitionAuthorities’,(2019)56CMLR121-156;JulianNowag,‘CompetitionLaw’sSustainabilityGap?ToolsforanexemptionandBriefOverview’,(2019)LundUniversityLegalResearchPaperSeries,<https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3484964>accessed17January2020;the2010OECDReport(n3);MauritsDolmans,”SustainableCompetitionPolicy”(tobepublished).26 European Commission, ‘Guidelines on the Application of Article 81(3) of the Treaty’ [2004]OJ C101/97 (‘2004ExemptionGuidelines’)andEuropeanCommission,‘GuidelinesontheapplicabilityofArticle101oftheTreatyontheFunctioningoftheEuropeanUniontohorizontalco-operationagreements’[2011]OJC11/1(the‘2010HorizontalGuidelines’).27See(n25).

17

Inmyview,theconstitutionalprovisionsofthetreatyrequireustotakethe‘maximalistview’,the

‘secondformofintegration’andboththe‘supportive’and‘preventative’integrationapproach.28

WhileItouchonsomeoftheargumentsinsupportofthis,othershavedonesoinmoredetail.My

primarypointsarethreefold:

i. if we are serious about tackling the existential threat posed by climate change there is a

political,economicandmoralimperativetomaximisethepossibilitiesforallowing(andthus

encouraging)arrangementstotackleclimatechange.Nowisnotthetimetobetimid;

ii. Wehavethelegaltoolstodothis.Notonlydothe‘constitutional’provisionsofthetreaties

require this (as discussed in section IV. above) but there is plenty of authority from the

CJEU29 in support of this and a number of examples in the Commission decisions to

emboldenus;

iii. My hope is that a better understanding of the legal possibilities (and legal requirements)

should encourage the development of agreements to tackle climate change and other

sustainabilityissuesanddiminishthedarkshadowthatcompetitionlawcurrentlycastsover

potentialcollaboration.30

AsmentionedinsectionII.,therearemanycircumstanceswhereco-operationbetweencompetitors

isnecessarytoachievevitalsustainabilityobjectives(or,asCommissionerVestagerhasrecognised,

itisthemosteffectivewaytodoso).Whereanindividualcompanyseekstointernaliseaso-called

‘externalcost’(suchaspollutionoftheairorusingamoresustainableinput)it is likelytoincuran

extracostanditmaysufferasignificantcompetitive(or‘firstmover’)disadvantageifitisthefirst,or

only,competitortodothis.31Agreementamongstcompetitorsisawayof‘levellingtheplayingfield’

on thebasis of costs that reflect the true costsof production. To theextent that this encourages

others to compete on this basis (ie on a fully cost or true cost basis) it can be seen as pro-

competitive, rather than restrictive of competition. Furthermore, the more these costs are

internalised, the greater the incentives for companies to lower these costs—a ‘win win’ for the

environmentandcompetition.

28Subjectalwaystothequalificationssetoutwithinthecompetitionprovisionsthemselves–notablythethirdandfourthconditionsofArticle101(3).SeefurtherdiscussionoftheseconditionsinsectionV.iv.29AsSuzanneKingstonhasconcluded,‘overalltheCJEUhasdemonstrateditselftobeaconstitutionalistactorwhich is seriousabout the requirement toachieve real, substantive integrationofenvironmentalprotectionrequirements intotheEU’seconomicpolicies,as requiredbyArticle11’. Ithas“usedwhatcanbetermeda‘close lookproportionalityanalysis’closelyexamining[that]thepurportedenvironmentalaimswereactuallybeingrealised,andintheleastrestrictivemanner”,SuzanneKingston,“TheUneasyRelationshipbetweenEUEnvironmental and Economic Policies, and the Role of the CJEU”, (2015) UCD Working Paper in LawCriminology&Socio-LegalStudies,<https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2686526>accessed17January2020.30Manyotherssharemyconcern.See,egtheconcernsexpressedbytheEconomicandSocialCommitteeoftheEuropeanParliamentandinthestudyintoindustryattitudestomulti-stakeholdercollaborationreferredtoin(n5).31So-called‘externalcosts’are,eg,coststhatariseduringtheproductionofaproductwhich,insteadofbeingbornebytheproducer,consumersorotherbuyers,areborneeitherbyidentifiablethirdparties(suchaunderpaidworkersinoff-shorefactories);thetaxpayer(egwherethegovernmentbearsthecostofcleaningupapollutedriver);bysocietyasawhole(eginthecaseofairpollution)orfuturegenerations(eginthecaseoftheproductionofgreenhousegases).Agoodexampleofthe“firstmoverdisadvantage”isthedecisionofGermandiscountretailer,LidlonlytosellFairtradebananasinGermany.CompetitorsdidnotfollowandLidllostsalesresultinginareluctantreversalofthedecisiononly8monthslater:https://bananalink.org.uk/news/Lidl-backs-away-from-fairtrade-bananas/

18

Furthermore, just as sustainability is an essential (and recognised) part of European Competition

policy, awell-functioning competitionpolicy can contribute to sustainabilitybyencouraginggreen

innovationandmakingbusinessmoreresponsivetoconsumers’demandsforsustainableproducts.

Ifwelldesignedandapplied,therelationshipbetweensustainabilityandcompetitionpolicycanbe

mutuallybeneficial.Thereisthereforemuchtobegainedifwecanonlygetthisright.

There are various ways in which environmental or sustainability agreements32 might escape the

prohibitiononanti-competitiveagreements.Differentpeoplewillfavourdifferentroutes(Itoohave

mypreferences).However,whileananathematomanylawyers,thekeypointisthatvitalprogress

onsustainabilityissupported,notimpeded,bycompetitionlaw:exactlyhowitisdoneisverymuch

asecondaryconsideration.

Iwillconsiderfive(overlapping)waysinwhichthismightbedone:

(1) Someagreementsareunlikelytorestrictcompetitionatall;

(2) Take the view that sustainability agreements essentially fall outside Article 101(1)

completely(the‘Albany’route);

(3) See sustainability agreements as falling within the ancillary restraints/objective necessity

doctrine(alessradicalversionof(2));

(4) SomesustainabilityagreementsfallwithinArticle101(3)(generallymypreferredroute);

(5) Makemoreuseofthemoregeneroustreatmentofstandardisationagreements(essentially

avarianton(1)and(4)above).

V.i.AgreementsthatdonotRestrictCompetition

It is self-evident that not all sustainability agreements will restrict competition. For example, the

EuropeanCommission’s2001HorizontalGuidelinessaidthatanenvironmentalagreementwouldbe

unlikelytorestrictcompetitionif:

a) itdoesnotplaceanyindividualobligationontheparties,orifpartiesonlycommitlooselyto

contributingtoasector-wideenvironmentaltarget,

32 Paragraph 179 of the European Commission’s 2001 Horizontal Guidelines defined environmentalagreements as ‘agreements by which parties undertake to achieve pollution abatement, as defined inenvironmentallaw,orotherenvironmentalobjectives…inparticularthosesetoutinArticle174oftheTreaty[oftheEC]’.ThisprovisionisnowArticle191oftheTFEUandstatesthatUnionpolicyontheenvironmentshallcontributetothepursuitofthefollowingobjectives:

- preserving,protectingandimprovingthequalityoftheenvironment;- protectinghumanhealth;- prudentandrationalutilisationofnaturalresources;- promoting measures at international level to deal with regional or worldwide environmental

problems,andinparticularcombattingclimatechange’.I am not aware of a definition of ‘sustainability agreements’ and am aware that for some sustainabilityagreementsmightincludeawiderrangeofissues(eg,reflectingtheUNSustainableDevelopmentGoals).Forme, a sustainability agreement is one that contributes to sustainable development. The BrundtlandCommissiondefinedsustainabledevelopmentasdevelopmentthat ‘meetstheneedsofthepresentwithoutcompromisingtheabilityof futuregenerationstomeettheirownneeds’.This isabroadconceptbut inthispaper I am generally using the terms environmental and sustainability agreements interchangeably;BrundtlandCommission,OurCommonFuture(Report)(OxfordUniversityPress,1987).

19

b) the agreement stipulates environmental performance with no effect on product and

productiondiversity,or

c) itgivesrisetogenuinemarketcreation.

Although the 2001 Horizontal Guidelines have been replaced by the 2010 Horizontal Guidelines,

arguably theycanbeusedto interpret the latterwheretheydonotcontainsufficientguidance. If

theEUisseriousaboutbeingaworldleaderintacklingclimatechange,itistobehopedthatwhen

theCommissionupdates the2010HorizontalGuidelinesa chapteron sustainability agreements is

notonlyincludedbutsetsoutaclearroadmapthatencouragestheirdevelopment33.

There are a numberof sustainability agreementswhich theCommissionhas accepted fall outside

Article101(1).GoodexamplesaretheJAMAandKAMAagreementsconcerningemissionreductions

amongstcarproducersbutwhichdidnotimposeapreciseobligationastothemethodsofachieving

this.34 More importantly, there are probably thousands of sustainability agreements which have

beenself-assessedasnotfallingwithinArticle101(1).35Itisimportantnottolosesightofthiswhen

consideringthenextsections.

33 This would be consistent with the request by the Economic and Social Committee of the EuropeanParliament in its 2018 Annual Report on Competition Policy (n 5) where, at paragraph 48 it says that ‘theCommission should create legal certainty on the conditions underwhich collective arrangements… for thepurposeof sustainability…wouldbeassessedundercompetition law,andencouragesuch initiativeswithincompetitionpolicy’.34 JAMA and KAMA XXVIII the Report on Competition Policy (1998). Another example is the DSD Caseconcerning the collectionofplasticwastewherebecause theagreement gave rise to anewmarket (plasticwastemanagement),theCommissiontooktheviewthattheagreementfurtheredcompetition,despitesettingpricesandestablishingexclusivity:DSDcase(COMP/34493).35AgoodexampleisgivenbytheOFTinitssubmissiontothe2010OECDReport,p100(n3).ThisconcernedanagreementbetweenmajorproducersofYoghurtwhichagreedwithmajorpackagingsupplierstodevelopand implementavoluntary initiative tomakeyoghurtpots fromrecycledplastic. TheOFTexplainswhy thiswould not fall within Article 101(1).Most of these agreementswill understandably avoid any reference toprice. However, it is worth recalling that even agreements between competitors concerning price are notnecessarilycaughtbyArticle101(1).Eg,anagreementbetweenpurchaserstopaya‘fair’or‘reasonable’pricetofarmersmightescapeArticle101(1)if(a)themarketshareofthepurchaserswassmalland/or(b)thecostofproductwasa smallpercentageof thepriceof theirdownstreamproduct.Consider, eg, a cupof coffee.Suppose this costs£2.50on thehigh street,of thisabout10p is for thecoffee itself (4%).Of this10p,onlyabout 1p (10%) typically goes to the grower - ie 0.4% of the cost of the cup of coffee on the high street(ChelseaBruce-LockhartandEmikoTerazono, ‘FromBeantoCup,WhatGoes intotheCostofyourCoffee?’,FinancialTimes(3June,2019).However,theseissuesneedtobeanalysedcarefullyonacasebycasebasis.ThedifficultiesareillustratedbyvariousattemptsovertheyearstopayadecentpricetoEUfarmersformilk.Eg, anMoU involving French cooperatives, farmers and retailerswhich included aminimum andmaximumpricewasnotchallengedby theFrenchcompetitionauthorities (but it concernedonlyone typeofmilkandonesupermarket).UndertheCommonAgriculturalPolicytherearegeneralexemptionsinArticles39-42TFEUandanumberofsector specific derogations fromcompetition law. Eg,Article 149&150of theCMORegulation allows jointnegotiations in the supplyofmilkbyproducers,provided that thisdoesnot concernmore than33%of thetotalnationalproduction;see:FairTradeAdvocacy,‘EUCompetitionLawandSustainabilityinFoodSystems.Addressing the Broken Links’ (Brussels, February 2019)<http://www.responsibleglobalvaluechains.org/images/PDF/FTAO_-_EU_Competition_Law_and_Sustainability_in_Food_Systems_Addressing_the_Broken_Links_2019.pdf>accessed17January2020,p48.

20

V.ii.The‘Albany’Route

IntheAlbanycase,theEuropeanCourtofJustice(‘ECJ’)36essentiallydecidedthatArticle101does

notapplytocollectivebargaining.InonesensetheAlbanycaseisjustoneofseveralcasesapplying

theancillaryrestraints/objectivenecessitydoctrineconsideredatV iiibelow.Iseparateitoutfor

tworeasons:

a) The ECJ relied very heavily on the need to construe the ‘constitutional’ provisions of the

treatywithArticles85(1)[now101(1)]‘asaneffectiveandconsistentbodyofprovisions’.It

noted that the ‘social policy objectives pursued by [collective] agreements would be

seriouslyunderminedifmanagementandlabourweresubjecttoArticle85(1)oftheTreaty

whenseekingtoadoptmeasurestoimproveconditionsofworkandemployment’.

The court held that ‘it therefore follows from an interpretation of the provisions of the

Treatyasawholewhichisbotheffectiveandconsistentthatagreementsconcludedinthe

context of collective negotiations between management and labour in pursuit of such

objectivesmust, by virtue of their nature andpurpose, be regarded as falling outside the

scopeofArticle85(1)oftheTreaty’.

Exactly the same reasoning couldbe applied to sustainability agreements as for collective

agreements in the workplace. Indeed, arguably, the case is stronger for sustainability

agreementsgiventheexpressreferencestothe‘protectionandimprovementofthequality

of the environment’ and to ‘sustainable development’ in the ‘constitutional ‘provisions of

theTFEU(seesectionIV.above).

b) TheAlbanyjudgementwasverymucha‘political’or‘policy’decisionbytheECJwhichwas

veryconsciousofthepoliticalsensitivityofcompetitionlawintheareaofsocialpolicy.

Myownpersonalpreferenceisgenerallytoseeappropriateagreementsbeingexemptedunder

Article101(3)–andsubject to theproportionality testwhich it contains.37However, for those

whotakeanarrowerviewofArticle101(3)(orforagreementsthatdonotclearlymeetthefour

conditions of Article 101(3)), the Albany judgement potentially provides a clear cut and

authoritativewayoffindingasustainabilityagreementtofalloutsideArticle101(1)completely.

V.iii.TheAncillaryRestraints/ObjectiveNecessityRoute36AlbanyInternationalBVv.StichtingBedrijfspensioenfondsTextielindustrie[1999]C-67/96ECR1999.ThatAlbanyisstill‘goodlaw’isclearfrommorerecentcasessuchasFNVKunstenwhich,notonlyre-affirmedtheAlbanyprinciple,butextendeditbyholdingthatcollectivelabouragreementsinvolving‘serviceprovidersinasituationcomparabletothatof[employedworkers]mayalsofalloutsideArticle101(1)completely’,FNVKunstenInformatieenMediavStaatderNederlanden[2014]C-413/13.37SeesectionV.iv.

21

There have been a number of cases38 over the years where the European Commission and the

EuropeancourtshavefoundavarietyofagreementstofalloutsideArticle101(1)completely(either

as‘ancillaryrestraints’orasbeing‘objectivelynecessary’).39

Inprinciple,there isnoreasonwhythisapproachshouldnotbetaken inthecaseofsustainability

agreements such that proportionate restrictions inherent in a sustainability agreement, without

which the Agreement would not have been concluded (cF Albany), and restrictions necessary to

carryoutanenvironmentalregulatorytask(cFWouters)wouldfalloutsideArticle101(1)entirely.

Iwouldaddtwocommentshere:

a) Theapplicationofthesedoctrinestoenvironmentalagreementshasnotyetbeentestedin

the courts.While thismaybe seenby someasadifficulty, it is alsoanopportunitywhich

shouldbegraspedtominimisetheextenttowhichcompetitionlawriskscompromisingvital

actiontotackleclimatechange.

b) In reality, many of these decisions can be seen as a policy decision reflecting how

sympathetic (or otherwise) the court was at the time to the ‘public interest’ issue in

question.Asenvironmental,sustainabilityandclimateissuesgoupthepoliticalagendathe

more likely it is that theywill be treated sympathetically (like anti-doping rules) and less

likely that theywillbeseenassomethingthat iscaughtbyArticle101(1),andwhichmust

meet the conditions of Article 101(3) if they are to escape that prohibition (like the

restructuringoftheIrishBeefMarket).40

V.iv.TheExemptionRoute:Article101(3)

UnlessitisclearthatasustainabilityagreementdoesnotfallwithinArticle101(1)then,inmyview,

themostobviouswayforittoescapetheprohibitionofthatprovisionisforittobeexemptedunder

Article101(3).

AsmentionedatthebeginningofthissectionV.,muchhasbeenwrittenaboutwhatcan,andwhat

cannot, be taken into account under Article 101(3).41 As discussed in section IV., much of the

difficultyarisesfromanunnecessaryfocusona(narrowlyconceived)‘consumerwelfare’testwhich

38Examplesinclude:

(a) Albany(seesectionV.ii.and(n36));(b) Self-RegulationoftheDutchBar(BanningMulti-DisciplinaryPartnerships)[1999]C309/99Wouters

[2002]ECR1-1577.(c) Meca-Medina[2006]C-519/04ECR1-6991.IfthiscaseconfirmstheWoutersreasoningandextendsit

to include public health requirements, then why should it not be extended to environmental andsustainability issues?Bothhavea similar statuson the ‘constitutional’ provisionsof the treaty (seesectionIV.).

39ForadiscussionoftheseconceptsseeWhish&Bailey(n12),p132–144.SeealsothejudgmentoftheUK’sCompetitionAppealTribunalinthePingcase[2018]CAT13[199]to[207].40Contrasttheapproachtoanti-dopingrulesinMeca-Medina(n38)andtotherestrictionsoftheIrishbeefindustryinCompetitionAuthorityv.BeefIndustryDevelopmentSociety[2008]C-209/07ECR1-8637,[21].41See(n25)forsomeexamples.

22

leads many writers to ask (with the best of intentions) unnecessary questions such as can ‘non-

economic’,‘publicinterest’,or‘non-competition’issuesbetakenintoaccount?42

Myapproach is to lookatwhatArticle101(3)actually saysand interpret it (as the treaty sayswe

‘must’) in the light of the ‘constitutional’ provisions of the treaties.[Is that really such a radical

approach?].Article101(3) requiresanagreement tomeeteachof fourconditions tobeexempt. I

willconsidereachinturn.

CONDITION1:Improvements&Progress

Probably themost importantof these forpresentpurposes is the first one. Theagreementmust:

‘contribute to improving the production or distribution of goods or to promoting technical or

economicprogress’(emphasisadded).

Fourthingsareimmediatelyapparent:

i) Again,thereisnoreferenceto‘consumerwelfare’;

ii) ‘Economic’progressisonlyoneoffourseparatewaysinwhichanagreementmaymeetthe

criteriaofthiscondition(notethedisjunctive‘or’).Thereisthereforenoneedtotranslateall

improvements andprogress into ‘economic’ terms-and still less reason to reduce them to

narrow financial considerations.While theremaybe instanceswhereputtinganeconomic

valueonabenefitmaybeuseful incarryingoutaproportionalityanalysis, this shouldnot

become a straightjacket restricting the application of Article 101(30. If it does we are in

dangerofturningintoOscarWilde’scynic-knowingthepriceofeverything,andthevalueof

nothing43;

iii) Evenifonefocusesjustonthe‘economic’criterion,manysustainabilityagreementswillfall

within this. For example, is it not ‘economic’ progress if an agreement leads to the

productionofanenginethatcosts€1,000withhalftheemissionsof itspredecessorwhich

also cost €1,000? Inmy view, yes – and it is not necessary to establish that, but for the

agreement, the less polluting enginewould have cost €2,00044 (in any case, this is clearly

‘technical’progress).

Consistentwith this, the OECD has recognised ‘cost savings, innovation, improved quality

andefficiency’as ‘directeconomicbenefits’whichare ‘typically recognised in competition

lawanalysis’ 45.Many,or evenmost, environmental benefits are likely to fall underoneor

moreoftheaboveheads.46

42 This is not to suggest that such an approach is fatal to the argument for a proper and expansiveinterpretationofArticle101(3) (mypoint is: it isnotnecessary to take thisapproach). Eg, theCFI (now theGeneralCourt)heldintheMétropolecasethat:‘theCommissionisentitledtobaseitselfonallconsiderationsconnectedwiththepursuitofthepublicinterestinordertograntexemptionunderArticle85(3)oftheTreaty’,MétropoleTélévisionv.Commission[1996]T-528/93ECRII-649,[118].43SeefurthersectionVIII.vii.7‘Isitalltoodifficult’.44ThesamelogicledtheCommissiontoconcludeintheCECEDDecision(n48)that;‘thefutureoperationofthetotalofinstalledmachinesprovidingthesameservicewithlessindirectpollutionismoreeconomically

efficient’(emphasisadded).45See2010OECDReport(n3),p11.46WhileItakeissuewiththeuseoftheselabels,theOFT’scontributiontothe2010OECDReport(n3)containsaninterestinganalysisofso-calleddirectandindirectbenefits.Itacknowledgesthat‘directeconomicbenefits,eventhoseofanenvironmentalnature[!],allowforgreaterobjectivity,aremoreamenabletoquantificationandgenerallyfallwithinacompetitionauthority’sareaofexpertise.Assuch,theadvantageof

23

Inthissenseitislegallywrong(andunhelpfulfortheanalysis)toclassifyenvironmental(or

anyotherbenefits)assomehow‘non-economic’oras(only)‘indirecteconomicbenefits’(or

‘non-competition issues’). We should resist the temptation to apply arbitrary labels to

everything; we should look at the specific facts, benefits and issues and apply the law

accordingly.

iv) There is no reference here to ‘pro-competitive effects’. Many lawyers and economists

(myself included) lapse into saying that Article 101(3) allows one to balance the ‘pro-

competitive effects’ against the ‘anti-competitive effects’ identified under Article 101(1).

Wrong: this is not what Article 101 (3) says. While this is sometimes a useful shorthand

(certainly when advising lay clients), it can be both lazy and misleading. In important or

difficultcasesitisessentialtofocusonwhatArticle101(3)actuallysays.

WhileattimestherearedecisionsandstatementsbytheCommissionandcommentatorsthatare

unhelpful,weshouldneverlosesightoffourthings:

a) the constitutional requirement that ‘environmental protection requirements must be

integrated into the… implementation of [all] theUnion policies and activities’ (Article 11

TFEU);and

b) helpfulstatementsfromtheCommissionovertheyears.Forexample:

‘When the Commission examines individual cases, it weighs up the restrictions of

competition arising out of an agreement against the environmental objectives of the

agreementandappliestheprincipleofproportionalityinaccordancewithArticle[101(3)].In

particular,improvingtheenvironmentisregardedasafactorwhichcontributestoimproving

productionordistributionortopromotingeconomicortechnicalprogress’47;and

c) clearandhelpfuldecisionsof theCommissionsuchas themuchdiscussedCECEDwashing

machinecase.48

takingthemintoaccountwhenexamininghorizontalagreementsappearstobenon-controversialandtofitwellwithstandardcompetitionassessmentofhorizontalagreementsunderArticle101’.Sofarasso-called‘indirecteconomicbenefits’areconcernedOFT’spapersetsout(p104to108)theargumentsforandagainst‘incorporatingenvironmentalissuesintheanalysisofhorizontalagreements’.Onp98itstatesthat‘themainadvantagesofincludingindirectandnon-economic(sic)benefitsintheanalysisofhorizontalagreementswouldbethatthetotalityofbenefitsofanagreementtoallcustomersaretakeninto

account.Thiswouldreducethelikelihoodofcompetitionpolicybeingablockonpotentiallygovernmentsponsoredinitiativesandwouldensureconsistencywithstandardcost-benefitanalysis’.Exactly!(emphasisadded).Iwouldacknowledge(andindeedagree)withmostofthepointsmadebytheOFTundertheheading‘argumentsagainstincludingindirectandnon-economicenvironmentalbenefits’(p106to108).However,Iseethesemainlyasdifficultiestobeovercomenotasreasonsnottoincludeenvironmentalbenefits(and,indeed,costs)intheanalysis(seealsosectionVIII.vii.:‘Isitalltoodifficult’).Itisnotaquestionofwhattypesofenvironmentalbenefits(andcosts)shouldbetakenintoaccount:itisaquestionastotheweightweshouldplaceonthem.47EuropeanCommission,‘XXVReportonCompetitionPolicy’(Brussels/Luxembourg,1995).Interestingly,thisstatement was made in 1996. If this was the position in 1996, before the current environmental‘constitutional’provisionswereincludedinthetreatiesintheircurrentform,thenlogicallythisisevenmorethecasenow.48CECED(CECED[1999]L187/47OJ2000]).Inthiscase,theCommissiongrantedanexemptiontoanagreementbetweenproducersandimportersofwashingmachines(accountingforsome95%ofEuropeansales)whichinvolveddiscontinuingtheleastenergyefficientmachinesandpursuingjointenergyefficienttargetsanddevelopingmoreenvironmentallyfriendlymachines.Despiteincreasingprices(byupto19%)andremovingcompetitionononeelementofcompetition,theCommissionacceptedthatthecollectivebenefitsforsociety(ieareductioninenergyconsumption)outweighedthesecosts.

24

d) ManyhelpfulcommentsbyadvocategeneralsandtheCJEUovermanyyears:forexample,

in the 3F v Commission judgement the CJEU held: ‘... the Community has not only an

economicbutalsoa socialpurpose, the rightsunder theprovisionsof theTreatyonState

Aidandcompetitionmustbebalanced,whereappropriate,against theobjectivespursued

bysocialpolicy’.49

It issometimessuggestedthatsomeoftheCommission’sstatementsanddecisionsfavourable

totheenvironmentpredateso-called‘modernisation’aroundtheturnofthecentury.Bethatas

itmay,theseareoftenthestatementsanddecisionsmostalignedwithboththetreatiesandthe

acknowledgedneedtorespondtoclimatechange.50Competitionpolicyneedsafurtherreboot

to reflect current realities and our political, economic and environmental priorities. The older

cases serve to show thatwhat is neededhasbeen recognisedas consistentwith the law.Put

anotherway,itshowswehavethelegaltools.Wemustnotbeafraidtousethem.

CONDITION2:FairShareforConsumers

The secondconditionwhichmustbe compliedwith foranagreement tobeexemptunderArticle

101(3)isthattheagreementallows:

‘consumersafairshareoftheresultingbenefits’.

This invites twoquestions:whoare the relevant ‘consumers’ for thispurpose?Andwhat is a ‘fair

shareoftheresultingbenefit’?

(A) Consumers

Paragraph 47 of the 2010 Guidelines says that the ‘concept of ‘consumers’ encompasses the

customers,potentialand/oractual,ofthepartiestotheagreement’.Similarly,paragraph84ofthe

ExemptionGuidelinessaysthatthe‘conceptof“consumers”encompassesalldirectorindirectusers

oftheproductscoveredbytheagreement’.

Sofar,sogood(or,atleastOK).Butisthatallit‘encompasses’.Inmyview,no:

i) First,asshownabove,Article101(3)doesnotjustrelatetoimprovementsintheproduction

ordistributionofgoods.Itmayequallyconcernagreementsrelatingmuchmoregenerallyto

technical or economic progress where there may be no easily identifiable group of

purchasers;

ii) As shown above, it is clear that environmental benefits fall within the first condition and

theseoftenbenefitsocietyasawholenotjustanarrowgroupofpurchasers;

493FvCommission[2009]C-319/07PECR1-5963,[58].50Iwelcomed‘lanouvellevague’infilm,and‘modernism’inarchitecturebutthatdoesnotmeanwecan’tseekinspirationfromolderfilmsortheSistinechapel.Furthermoresomeoftheworst(anddareIsay,dangerous)architectureinthe1960spost-datesmodernism,andthebestmodernarchitectureadherestomuchhigherstandards.Perhapswewilllookbackatsomecompetitiondecisionsofthe“noughties”inthewaywenowlookatmuchof1960sarchitecture:wellmeantbut,inretrospect,adisaster.

25

iii) In thissense itmustberecognisedthatconsumershavewider interests thantheirnarrow

financialones(concernedwithmoreorbettergoodsateverlowerprices);51

iv) If there were any doubt about this then one should yet again recall the constitutionalrequirement that ‘environmental protection requirementsmust be integrated into the …

implementation of [all] the Union policies and activities’ (Article 11). To interpret the

concept of ‘consumers’ narrowly would run counter to this. Not only does this mean it

cannot be correct as amatter of law, itwould be contrary to the political, economic and

moral imperative todoeverythingwe (lawfully) can to combat climate change (let usnot

losesightofthis!)

v) Happily,theCommissionhasoften(butnotalways)recognisedthis–theclearestexample

beingitsCECEDdecisionwhereitexplicitlyacknowledgedthatitwastakingintoaccountthe

‘collectiveenvironmentalbenefits’oftheagreement:the‘environmentalresultsforsociety

wouldadequatelyallowconsumersafairshareofthebenefitsevenifnobenefitsaccruedto

individual purchasers’(emphasis added).52 This is consistent with the recognition in

paragraph 85 of the Commission’s 2004 Exemption Guidelines that ‘society as a whole

benefits where the efficiencies lead either to fewer resources being used to produce the

output consumed or to the production of more valuable products and thus to a more

efficientallocationofresources’.

vi) A narrow view of consumers does not seem consistent with several judgements of the

Europeancourts.Forexample,inCompagnieGeneraleMaritimetheGeneralCourt(thenthe

CFI)heldthat,inconsideringArticle101(3)(asitnowis):‘regardshouldnaturallybehadto

the advantages arising from the agreement in question, not only for the relevant

market…butalso, inappropriatecases, foreveryothermarketonwhichtheagreement in

questionmighthavebeneficialeffects,andeven,inamoregeneralsense,foranyservicethe

qualityorefficiencyofwhichtheagreementinquestionmightbeimprovedbytheexistence

of that agreement…[Article 101(3)] of the Treaty envisage[s[ exemption in favour of,

amongstothers,agreementswhichcontributetopromotingtechnicaloreconomicprogress,

withoutaspecificlinkwiththerelevantmarket‘(emphasisadded).53

While I consider a narrow approach to consumers is inconsistent with the treaties and risks

underminingvitalagreementstocombatclimatechange,itmustberecognisedthattheremustbe

some limits totheconceptofconsumers.Forexample, itwouldnotseemrighttosuggestthatan

agreement restricting competition (and caught by Article 101(1)) in product market A, and in

geographic market X, nevertheless satisfies the conditions of Article 101(3) because of benefits

accruingexclusivelyinproductmarketB,andgeographicmarketY.Sotheremustbesomelimitsto

theconceptofconsumers,butwhatarethey?

51Thispointisechoedinparagraph78ofthe2018AnnualReportonCompetitionPolicy(n5);SeesectionVI.i(vi).52See(n48).53CompagnieGeneraleMaritime[2002]T-86/95II-01011.Forfurthercasessuggestingthatanarrowapproachisnotcorrect(orinneedofan‘update’)seethecasescitedbyGrantMurrayinhisexcellentshortblog:GrantMurray,’AntitrustandSustainability:GlobalWarmingUptobeaHotTopic?’,KluwerCompetitionLawBlog(18October2019)<http://competitionlawblog.kluwercompetitionlaw.com/2019/10/18/antitrust-and-

sustainability-globally-warming-up-to-be-a-hot-topic/>accessed18January2020.

26

Paragraph43oftheExemptionGuidelinesisanattempttoidentifythoselimitsandtheconsumers

whose interests must (or can) be taken into consideration when applying Article 101(3) and

assessingwhethertheygeta‘fairshare’oftheresultingbenefitsidentifiedunderthefirstcondition

ofArticle101(3).Paragraph43beginsinfairlyrestrictiveterms:

‘The assessment under Article [101(3)] of benefits flowing from restrictive agreements is in

principlemadewithin the confines of each relevantmarket towhich the agreement relates. The

Communitycompetitionruleshaveastheirobjecttheprotectionofcompetitiononthemarketand

cannotbedetachedfromthisobjective.Moreover,theconditionthatconsumersmustreceiveafair

share of the benefits implies in general that efficiencies generated by the restrictive agreement

within a relevantmarketmustbe sufficient tooutweigh theanti-competitive effectsproducedby

theagreementwithinthatsamerelevantmarket.Negativeeffectsonconsumersinonegeographic

marketorproductmarketcannotnormallybebalancedagainstandcompensatedbypositiveeffects

inanotherunrelatedgeographicorproductmarket’.

It then goes on, however, to recognise that in many circumstances for Article 101(3) to work in

practice(andasenvisagedbythetreaties)suchanarrowapproachisnotappropriate:

‘However,wheretwomarketsarerelated,efficienciesachievedonseparatemarketscanbetaken

intoaccountprovidedthatthegroupofconsumersaffectedbytherestrictionandbenefitingfrom

theefficiencygainsaresubstantiallythesame’54

Thisbroadeningistobewelcomedbut,forthereasonsgivenabove, itdoesnotgofarenough.As

GrantMurrayhasargued,paragraph43isinneedofwhathecallsan‘update’inthelightofrecent

cases55--or,attheveryleast,expandingifitistotakeproperaccountofenvironmentalagreements

whosebenefits(egcleanair,fewergreenhousegases,etc)areoftenwideinscope.InthisrespectI

wouldsuggest:

(i) ItwouldbehelpfuliftheCommissionprovidedfurtherguidanceon‘wheretwomarkets

arerelated’;and

(ii) It shouldnotbenecessary for the ‘groupof customersaffectedby the restrictionand

benefiting from theefficiency gains [tobe] substantially the same’ so long as they at

leastoverlap.Forexample,intheCECEDCase,theconsumersaffectedbytherestriction

of competition were not ‘substantially the same’ as those to whom the ‘collective

environmentalbenefits’accrued(thereducedpollutionfromelectricitygeneration)and

yet (as mentioned above) the Commission explicitly stated that such ‘environmental

resultsforsocietywouldadequatelyallowconsumersafairshareofthebenefitsevenif

nobenefitsaccruedtoindividualpurchasers’.

Thissuggests2possibilities:

a) The group of customers affected by the restrictions must be a subset of those

benefitingfromthebenefits(anarrowview);or

54It’sapitythetermactuallyusedinArticle101(3),‘benefits’,isnotusedhere,ratherthananimportedterm‘efficiencies’butthemeaningis,nevertheless,clear.55SeethecasescitedbyGrantMurray(n53).

27

b) It issufficientthatthereissomeoverlapbetweenthegroupofcustomersaffected

bytherestrictionsandthosereceivingthebenefits(abroaderview).

Paragraph85oftheExemptionGuidelinessaythat‘theneteffectoftheagreementmustbeneutral

from the point of view of those customers directly or indirectly affected by the agreement…’ In

principle,thiscanwork,whetherthenarroworbroaderviewreferredtoaboveistaken,solongasit

isclearthatthisassessmentofthe‘neteffect’oftheagreementiscarriedoutlookingattheaffected

consumersasawholeandnotjustasubsetofthose(iethosedirectlyaffectedbytherestrictionsof

competition).

Thispointisimplicitinthelastsentenceofparagraph85oftheExemptionGuidelineswhichmerits

repeatinghere:

‘Society as awhole benefitswhere the efficiencies lead either to fewer resources being used to

producetheoutputconsumedortotheproductionofmorevaluableproductsandthustoamore

efficientallocationofresources’

Exactly!ThispointalsoemergesclearlyfromthepassagesintheCECEDDecisioncitedabove.

Totheextentthatthesepointsarenotclear,clarificationorguidancefromtheCommissionwould

bewelcome(certainlywhenthe2010Guidelinesareupdated).

An important question, in the context of the fight against climate change, is whether future

consumerscanbetakenintoaccount?Happily,theCommission’s2004ExemptionGuidelinesgivea

clear and positive answer (but with some discounting for the fact that these benefits are in the

future).56This ismostwelcomeas theneed toconsider futuregenerations (future ‘consumers’) is

central to the very concept of sustainability whether it is the effect of an agreement on climate

changeorotherenvironmental issuessuchas theneedtopreservebiodiversityandanecosystem

compatiblewithsustainingaglobalfoodsystem.57

WhetherconsumersoutsidetheEUcanalsobetakenintoaccountislessclear.Regrettablythelegal

positionisnotclear58.Thatsaid,thebenefitsofmanyenvironmentalagreementswillnotbelimited

toaparticulargeographicareasuchastheEUsotheissuemaynotariseinsuchcases.

56Seeparagraphs87and88oftheseguidelines(n26).Indiscountingforfuturebenefitsweshouldbecarefulnottodiscountfuturecostswhichmaybegoingupandwhichareoftenunderestimated(seetheSternReportonhowfutureclimatechangecostsareunderestimated(n1)).57 In this context see Ioannis Lianos and Amber Darr, ‘Hunger Games: Connecting the Right to Food andCompetition Law’, (2019) CLES Research Papers Series, <file://sann-ad-02.st-annes.ox.ac.uk/MemberData$/sann5572/Downloads/SSRN-id3414032.pdf>accessed18January2020.58Untilrecently,Iwouldhavesaid(withregret)thatitwasprobablynotpossibletotakeintoaccountconsumersoutsidetheEU.However,inthelightoftherecentdecisionoftheDutchSupremeCourtintheUrgendacasethereisanargumentthattheEUauthoritiesareobligedtotakeintoaccounttheeffectsonconsumersbeyondtheEU’sborders.IntheUrgendacasethecourtheld:“stateshave…theresponsibilitytoensurethatactivitieswithintheirjurisdictionorcontroldonotcausedamagetotheenvironmentbeyondthelimitsofnationaljurisdiction.Thisjudgmentwasbased(toagreatextent)ontheUNClimateChangeConventionandontheECHR-towhichtheEU,liketheNetherlands,isbound[Urgenda,DutchSupremeCourtpressreleaseof20,December,2019}.However,eveniftheviewistakenthattheeffectsonconsumersoutsidetheEUcannotbetakenintoaccountunder101(3),thatwouldnotmeanthatweshouldnotbeconcernedabouttheextra-territorialeffectofpollution(orsocialharms)generatedwithintheEU,orenvironmentaldamageeffectivelyoff-shoredby

28

(B) FairShareoftheResultingBenefit?

Thesecondquestionthatarisesiswhatconstitutesa‘fairshareoftheresultingbenefit’?

(i) First, some boring technical points. The condition does not suggest that consumersmust

benefitfromalowerprice.Itdoesnotevensuggestthattheconsumer’sbenefitneedtake

the formofa ‘fair’price. It speaksmoregenerallyof a ‘fair shareof the resultingbenefit’

which is clearly a flexible concept capable of taking into account wider sustainability

concerns. Furthermore, nothing here suggests that it is necessary to quantify and reduce

thesetonarrowfinancialconsiderations.

(ii) TheCommissionhashelpfully recognised this in its2004ExemptionGuidelines specifically

notingthat:

Thebenefitstoconsumerscan:

*‘take the form of qualitative efficiencies such as new and improved products creating

sufficient value for consumers to compensate for the anti-competitive effects of the

agreement,includingapriceincrease’(paragraph102).

*‘Anysuchassessmentnecessarilyrequiresvaluejudgement. It isdifficulttoassignprecise

valuestodynamicefficienciesofthisnature’(paragraph103)59.

*‘Inmanycasesitisdifficulttoaccuratelycalculate’thebenefitstoconsumerssuchthatitis

onlynecessarytoprovide‘estimatesandotherdatatotheextentreasonablypossible,taking

intoaccountthecircumstancesoftheindividualcase’(paragraph94.

*Furthermore, this is the case even when an agreement results in increased prices for

consumers(paragraph104).

(iii) Consistentwith thisboth theCommissionand theEuropean courtshaveoften recognised

thebenefittoconsumersof(so-called)externalfactorswithoutfeelinganyneedtoreduce

themtonarrowfinancialconsiderations.60

(iv) TheCommissionacceptsthattheenvironmentalqualitiesorcharacteristicsofaproductare

parametersofcompetition.Forexample,theCommissionisinvestigatingwhether5German

manufacturers colluded ‘not to improve their products, not to compete on quality’ by

limitingthe‘developmentandroll-outofemissioncleaningtechnologiesfornewdieseland

petrol passenger cars’ and whether they ‘denied consumers the opportunity to buy less

pollutingcars’.61 Ifenvironmental factorsarea relevantparameterof competition, itmust

importingproductswithparticularlyadverseeffectsontheenvironmentandclimatechange(beitbeef,wine,carsoroil).Itwouldmeansthattoolsotherthancompetitionlawarelikelytoberequired;egregulationsortakingimportedgoodsintoaccountwhendesigningandassessingcarbonneutraltargets.SeealsosectionVIi.onusingarticle102asa‘sword’.59Notealsothecommentsin(n130)ontheimportanceoffocusingonwhatisimportantandnotjustonwhatiseasyorreadablymeasurable.Itisbettertoberoughlyrightthanexactlywrong.60SeeegcasessuchasMetro,Exxon/ShellandPhillips/OsramascitedbyGrantMurrayinhisblog(n53).61CarEmissionsAT.407178–.SeeCommissionpressreleasesofEuropeanCommission,‘PressRelease:Antitrust:CommissionOpensFormalInvestigationintoPossibleCollusionbetweenBMW,DaimlerandtheVWGrouponCleanEmissionTechnology’(Brussels,18September2018),<https://ec.europa.eu/commission/presscorner/detail/en/IP_18_5822>accessed18January2020andEuropeanCommission,‘PressRelease:Antitrust:CommissionsendsStatementofObjectionstoBMW,Daimler

29

bea factor relevant to their customers (indeed, theabove statementsby theCommission

implicitlyconfirmthis). If this isthecase, it is logicaltoacceptthat improvements inthese

environmentalfactorsareofbenefittoconsumersforthepurposeoftheassessmentunder

Article101(3).

(v) Thequestionalsoariseswhetheritisjustthesubjectiveperceptionofaparticulargroupofconsumers of the environmental/sustainable benefits that needs to be assessed (the

approachtaken in the ‘ChickenofTomorrow’case–see (n136).While this is superficially

attractive,thereisastrongcasefortakingawiderview:

*Which‘consumers’viewsaretobetakenintoaccount?Asdiscussedabove,thismay

bepurchasersofparticulargoodsorsocietyasawhole;

*Therevealedpreferencesofconsumersurveysneedtobeusedwithextremecaution.

Inparticular,theyareverysusceptibletowhatquestionsareasked(andhowtheyare

worded);

*Thesepreferencesmaydifferfromthoseexpressedbythesamecitizensthroughother

means(egelectionsorconsumerattitudesurveys).62

*The constitutional provisions of the treaty make it very clear that environmental

protectionandsustainabledevelopmentareclearbenefitsfortheUnion(andtherefore

forconsumers)andit‘only’remainstobeassessedwhetherthesebenefitsexceedthe

harm from the anti-competitive effect of the agreement (the ‘balancing’ or

‘proportionality’principle).

(vi) Thereisastrongercasefora‘fairshareoftheresultingbenefits’beingassessedonan

‘objective’basiswiththerelevantcompetitionauthorityorcourttakingintoaccountall

the circumstances and available evidence (of which the expressed preferences of

particulargroupsofconsumersmaybeoneelement).

(vii) Whenassessingwhetherconsumersgeta“fair”shareofthebenefit,wecouldalsotake

intoaccountthatthepricepaidposttheagreementmaybeclosertothe“true”priceof

theproductthanthatbeforetheagreementifanypriceincreasemerelyreflectsthefact

thatsomeofthe(so-called)externalitiesarenowfactoredintothepricewhichtheypay

(seefurthern31onexternalitiesandn133onTrueCosts).

(viii) Finally, inconsideringwhata ‘fairshare’ofbenefits isweshouldrevisittheweightwe

attach to different factors. How much do we really benefit from having yet cheaper

‘stuff’? What weight should we attach to reducing carbon emissions and giving our

children and grandchildren clean air to breathe? These sort of questions are relevant

wheneverwearedoingabalancingactorapplyingtheprincipleofproportionality(for

example in Condition 1 of Article 101(3) or when assessing ‘abuse’ under Article 102

(See section VI. below). In this context it should be noted that the Stern Report on

climatechangeshowedclearlythatwegreatlyunderestimatethefuturecostsofclimate

andVWforrestrictingcompetitiononemissioncleaningtechnology’(Brussels,5April2019),<https://ec.europa.eu/commission/presscorner/detail/en/IP_19_2008>accessed18January2020.62Thismayalsoexplaintheso-called“ecoparadox”;consumerswantto“dotherightthing”andare,inprinciple,willingtopaymoretodoso,buthesitatewhenactuallymakingpurchasesinstore.

30

change.63 There is also a lot of research and evidence showing that the benefits of

materialpossessions(or‘stuff’)areephemeral64.

Unless we start to give proper weight to the things that really matter (climate change,

health,etc)andquestiontheweighttobegiventonarrowfinancialconsiderations,wewill

asktherightquestions,butcometothewrongconclusions.65

ConcludingCommentonConsumerBenefits

Fromdiscussionswithvariousofficialsincompetitionauthoritiesitseemsthatakeyobstacletoan

approachtoArticle103(3)thatismoresympathetictoagreementstocombatclimatechangeisthe

groupofcustomerstowhomthebenefitsaccrue.Somesuggestionsastoasuitableapproach,and

the limits to the customers inquestion, havebeenmadeabove. For thosewhoadvocate awider

approach to the first condition of Article 101(3) (such as myself) acceptance of such limits (and

perhapsothers)maybethenecessary‘price’wehavetopayintherealworldifwearetoget‘buy

in’fromthecompetitionenforcementcommunitytoamoreprogressiveapproachtosustainability

in general and to the fight against climate change in particular. Togetherwemust find away to

moveforward.

CONDITION3:NoMoreRestrictiveThanNecessary

TherequirementinArticle101(3)thattherestrictionsinanagreementshouldbenomorerestrictive

thannecessary66isanexpressionoftheproportionalityprincipleinEUlaw.AlthoughIamawarethat

itsapplicationhas ledtoanumberofenvironmentalagreementsfailingtobeexemptfromArticle

101,67 I consider the proportionality principle to be an important check on the broad approach

(whichIadvocate)totheenvironmentalimprovementandprogressofthefirstconditionofArticle

101(3). For example, agreements to pass on environmental charges to consumers would almost

63See(n1).64SeeJoshuaBecker,‘9ReasonsBuyingStuffWillNeverMakeYouHappy’,BecomingMinimalist(March2014),<https://www.becomingminimalist.com/buying-stuff-wont-make-you-happy/>accessed18January2020.65ApoignantillustrationofthisisperhapsanexamplegivenbytheOFTonp114ofitssubmissionforthe2010OECDreport(n3).TheUKgovernmentwantedtodevelopavoluntaryindustryagreementtoreducetheuseofsingle–usecarrierbagsinsupermarkets.TheOFTgaveadviseand,followingthis,insteadofsettingupavoluntaryagreement,thegovernment,merelyaskedindustrytoconsiderhowtheycouldencourageconsumerstoreducetheiruseofsingleuseplasticcarrierbags(whichprovedtobeprettyineffectiveandlegislationwasintroducedin2015imposinga5pperbagcharge).IamnotprivytotheOFT’sadvisebutIdowonderwhether,ifmoreweighthadbeenputontheenvironmentalbenefitsofthelevy,theoutcomewouldhavebeendifferentandwewouldhaveachievedthebenefitsmanyyearsearlier?IwouldalsohopetheCMAwouldbeabletogiverobustadvicenowifasimilarquestionwasputtothem(afterallmostofficialswillhavewatchedDavidAttenborough’s‘BluePlanet’!).66ThethirdconditioninArticle101(3)isthattheagreementmustnot‘imposeontheundertakingsconcernedrestrictions which are not indispensable to the attainment of those objectives’ (ie the improvements andprogress referred to in the first condition for the applicability of Article 101(3) and discussed earlier underCondition 1 above). In paragraph 73 of its 2004 Exemption Guidelines, the Commission suggests that this‘implies a two-fold test. First, the restrictive agreement as suchmust be reasonably necessary in order toachievetheefficiencies.Second,theindividualrestrictionsofcompetitionthatflowfromtheagreementmustalsobereasonablynecessaryfortheattainmentoftheefficiencies’.67Foradiscussionofthesecasessee,eg,Kingston(n25),p280-287.Foragoodexampleofanenvironmentalagreement(whichincludedrestrictionsonbothpriceandconsumerchoice)seetheCECEDDecision(n48),[58]-[63].

31

invariably be considered unlawful even if it could be argued that such pass on might motivate

customerconductconsistentwithenvironmentalpolicygoals68.

Therequirementalsoinvitesconsiderationoflessrestrictivewaysofachievingsustainabilitygoals.

Take the example of one of the more difficult sustainability goals; paying sustainable prices to

suppliersofagriculturalproducts.Ratherthanbuyersagreeingtopayaminimumpricetosuppliers,

theymightneedtoconsideragreeingtosetupafundtohelptheirsuppliersinvariousways–thus

remainingfreetoagreetheirpurchasepricesindividually.

CONDITION4:NoEliminationofCompetition

The final condition for exemption of an agreement is that there must be no elimination of

competitionintherelevantmarket.69

WhileI,again,considerthistobeanimportantcheckonanypotentialmisuseofArticle101(3),itis

rarelygoingtopreventasustainabilityagreementmeetingtheconditionsofArticle101(3)andsodo

notproposetodiscussitfurther.70

V.v.TheStandardisationApproach

At the beginning of this section V. on Article 101, I suggested that one way in which more

sustainabilityagreementsmightescapetheprohibitionofArticle101(ordosomoreeasily)mightbe

toframethemasstandardisationagreements.71

Thereisnospecificregulationorexemptionforstandardisationagreements,andtheywouldeither

needtofalloutsideArticle101(1),ormeettheexemptionconditionsofArticle101(3),toescapethe

prohibitionofArticle101.However,Imentionthemhereforfourreasons:

68Seethe2010OECDReport(n3),p12.Encouraginglythisalsonotesthatcertainjurisdictionshaveallowedagreementstopassonenvironmentalchargesinnarrowlydefinedcircumstances.Theexamplegivenconcernedwholesalersagreeingtopassonrecyclingchargesforpackagingmaterialstotheproducersresponsibleforproducingthepackaginginthefirstplace(consistentwiththefundamental‘polluterpays’principle).69ThefourthconditionofArticle101(3)isthattheagreementmustnot‘affordsuchundertakingthepossibilityofeliminatingcompetitioninrespectofasubstantialpartoftheproductsinquestion’.70Foradiscussionofthis,seeKingston(n25),p287-292foranexampleofanenvironmentalagreementwheretheCommissionwassatisfiedthattherewasno‘eliminationofcompetition’see[64]-[66]oftheCECEDDecision(n48).71Paragraph252of theCommission’s2010HorizontalGuidelinessays: ‘standardisationagreementshaveastheir primary objective the definition of technical or quality requirements with which current or futureproducts,productionprocesses,servicesormethodsmaycomply’.

32

(i) Many sustainability agreements take (or could take) the form of standardisation

agreements.Forexample, itseemslikelythatmanyoftheanimalwelfareobjectivesmight

havebeenachievedinthe‘ChickenofTomorrow’caseifthearrangementshadbeenframed

asastandardisationagreement(seen136);

(ii) TheCommission’s2010HorizontalGuidelinescontainaspecificchapteronstandardisation

agreements andmake a number of helpful comments (including giving an example of an

environmental agreement meeting the condition of Article 101(3) and noting that even

agreementsinvolvinghighmarketsharesmaystillescapeArticle101completely).72

(iii) In her Brussels Sustainability Conference speech Commissioner Vestager highlighted the

possibilitiesforbusinessto‘gettogethertoagreestandardsforsustainableproductsand...

they can do thatwithout breaking the competition rules’ providing certain conditions are

met. The conditions she set out are not controversial andmost sustainability agreements

shouldsatisfythem:

(a) Sustainabilityagreementsshouldnotbeacoverforcartels;(b) Youcanagreewhat‘sustainability’meansandcreateawellmonitoredlabel-butyoucan’t

agreehowtopasstheextracostsontoconsumers;(c) Ahandfulofcompaniescan’t‘definewhatproductsareallowedonthemarketinawaythat

suitsthem–andkeepothersout’;and(d) Everybusinesshastohavea‘fairandequalrighttousethestandard’(eganyproductthat

meetstherequirementsforsustainabilityshouldbeabletousethatlabel).Importantly she made it clear that ‘we don’t need new competition rules to make this

possible’ and that ‘it’s important that companies know about opportunities which they

alreadyhavetoworktogetherforsustainability’.Indeed,yes.Thebigchallengeistogetthat

messageouttobusinesses

.

(iv) Several commentators have suggested that environmental agreements have a greater

chance of complying with Article 101 if constructed and assessed as standardisation

agreements.73

72Note,eg,thefollowingcommentsinibid:Paragraph258:‘Standardisationagreementsgenerallyhaveapositiveeconomiceffect’;Paragraph277:‘Whereparticipationinstandard-setting,aswellastheprocedureforadoptingthestandardinquestion,isunrestrictedandtransparent,standardisationagreementswhichsetnoobligationtocomplywiththestandardandprovideaccesstothestandardonfair,reasonableandnon-discriminatoryterms,donotrestrictcompetitionwithinthemeaningofArticle101(1)’;Paragraph290:‘Astheeffectivenessofstandardisationagreementsisoftenproportionaltotheshareoftheindustryinvolvedinsettingand/orapplyingthestandard,highmarketsharesheldbythepartiesinthemarket(s)affectedbythestandardwillnotnecessarilyleadtotheconclusionthatthestandardislikelytogiverisetorestrictiveeffectsoncompetition’;Paragraph300:‘Standardisationagreementscangiverisetosignificantefficiencygains’.‘Standardson,forinstance,quality,safetyandenvironmentalaspectsofaproductmayinadditionfacilitateconsumerchoiceandcanleadtoincreasedproductquality’.73Agoodexample isTeorell’sdissertation (n25);Consistentwith theargument in thispapersheconcludesthat‘environmentalagreementscanformasolutionfortacklingclimatechange’.Anotherexampleisaspeechby a senior DG Competition Official, Luc Peeperkorn, ‘Sustainability Agreements: an EU Competition LawPerspective’ (unpublished): ‘Sustainability agreements are a form of standard-setting agreement. Whenassessing these agreements, the rules developed for standard-setting agreements provide a first point of

33

Ahighprofileandrecentexampleofbusinessseekingtoaddressclimatechangethroughtheuseof

standardsistheagreementbetween4carmakers(Ford,Honda,BMWandVW)toadheretohigher

standardsforexhaustpipeemissions.ThisisbeinglookedintobytheUSDOJbutitisdifficulttosee

how this could infringeantitrust law (this is aUScasebut thebroadprinciplesareessentially the

same under EU for present purposes). In particular, this is a classic case of ‘first mover

disadvantage’:ieifanyonecarmakerunilaterallyincreasesitsexhaustemissionstandardsitislikely

togive itselfacost (anda likelycompetitive)disadvantage.Secondly, it increasestheparticipating

firms’costs (not theirprices)so , to theextent thearrangement impactsonnon-participatingcar

makersitmaytendtogivethosethirdpartiesacostadvantageratherthandisadvantage.74

reference’.Bothofthesepapershelpfullysummarisetheconditionsunderwhichtheyconsiderenvironmental/sustainabilityagreementsmayavoidbeingcaughtbyArticle101(1)completely.74SeeHerbertHovenkamp,‘AreAgreementstoAddressClimateChangeAnti-competitive?’(2019)<https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3451931&download=yes>accessed18January2020.

34

VI. ABUSEOFDOMINANCE

I will deal more briefly with Article 102 TFEU which concerns the abuse of a dominant position

(usuallybylargecompanies)asitislesscentraltotheday-to-daytensionbetweencompetitionlaw

andclimatechange(atleastunderthecurrentcompetitionlawframework).75

Nevertheless,therearecircumstanceswhereitmaybepossibletouseArticle102toattackcertain

practiceswhichareobjectionablefromasustainabilitypointofviewand/orwhicharedamagingto

theenvironment(ieusingArticle102asa‘sword’)andotherinstanceswherepracticeswhichmight

lookpotentiallyabusivearenotwhenconsideredinthelightoftheenvironmentalandsustainability

provisionsofthetreaties(ieusingsustainabilityasa‘shield’).Iwillconsidereachinturn:

VI.i.Article102asa‘sword’

OneofthemostobviousweaponswithwhichtoattackunsustainablepracticesunderArticle102is

Article 102(a) which prohibits (as an abuse) all ‘unfair purchase or selling prices or other unfair

trading conditions’ of a dominant company. This is potentially broad ranging and, given that the

European courts have consistently held that the categories of abuse under Article 102 are not

fixed,76 there is no reason, in principle,why it could not be usedmorewidely to attack practices

whichareseenasunfairfromaneconomic,political,social,environmentalormoralpointofview.

Thequestionismore‘isthereawilltouseit?’ratherthan‘isitpossibletouseit?’

While this paper has generally focused on the relationship between competition law and the

environment/climate change, Article 102(a) provides an opportunity to consider the use of

competitionlawtotackleothernon-sustainablepracticessuchasthedepressinglylowpricespaidby

some retailers (or other intermediaries) to farmers for their produce. There is, of course, an

environmental/climatechangeaspecttothis inthatsuchlowpricesencourageanexcessiveuseof

scarceresourcesand lowprices (eg forbananas,cocoa,coffee)arediscouragingmanysustainable

landusepractices.77Thereisalsoanobviouspolitical/social/economic/moralangle.Whatis‘fair’

aboutapriceifafarmercannotaffordtofeedhis/herchildren?78

Iwouldsuggestthatapurchasepriceispotentially‘unfair’,andthereforepotentiallyan‘abuse’if:

(a) itdoesnotcoverthetruecostsofproduction;or(b) doesnotenablethefarmertomakesomereasonablemark-up(tofeedhis/herfamilyand

producefoodonasustainablebasis).75Forafascinatingdiscussionofthewiderproblemswithbigcompaniesandaneloquentpleafor‘stakeholderantitrust’seeMeagher(n2).ForafullerdiscussionofArticle102andenvironmentalissues,seeChapter5ofKingston(n25).76SeeegAstraZenecaABandAstraZenecaplcvEuropeanCommission[2012]C-457/10P.77Sometimes(butnotalways)thereareshort-termcostsassociatedwithmoresustainablelandusepractices.Lowpricescanpushproducerstoswitchtolesssustainablepracticeswithlowershort-termcosts.78Thelinkbetweenabuseofpowerandadequatefoodwasshownclearlyin2010byOlivierdeSchutterwhofounda ‘direct linkbetweentheabilityofcompetitionregimes toaddressabusesofpower insupplychainsand the enjoyment of the right to adequate food’, Olivier de Schutter, ‘Addressing Concentration in FoodSupply Chains’, Briefing Note 03, (2010),<https://www.ohchr.org/Documents/Issues/Food/BN3_SRRTF_Competition_ENGLISH.pdf> accessed 18January2020,p1.

35

Ifthisseemsradicalortoodifficult(andwearingmyoldprivatepractitionerhatitwouldhavetome)

thenconsiderthefollowing:

(i) wearenotconsideringanyfancyneworinnovativecategoryofabuse(àlaAstraZeneca79)

but thevery first categoryof abuse setout inArticle102 itself (aprovision thathasnot

changed since 1957). Furthermore, the concept of fair trade lies not only at the historic

heartofcompetitionlawandantitrust,80itisexpresslywrittenintotheconstitutionofthe

EU.Forexample,Article3(5)oftheTreatyonEuropeanUnionstatesclearlythatoneofthe

EU’sobjectivesisto‘contributeto…thesustainabledevelopmentoftheearth’andto‘free

andfairtrade’(emphasisadded).

(ii) ConsistentwiththisArticle39TFEUstatesthatoneofthekeyobjectivesoftheCommon

Agricultural Policy (‘CAP’) is to ‘ensure a fair standard of living for the agricultural

community’ and that ‘supplies reach consumers at reasonable prices’. Note that it says

‘reasonable’ prices not ‘low’ prices. Is it ‘reasonable’ to pay farmers a price thatmeans

theirfamiliesarelivingbelowthepovertylineorhavetorelyonfoodbanks?Furthermore,

Article 42 TFEUmakes it clear that (inter alia) the competition rules only apply at all to

tradeinagriculturalproductstotheextentthat‘account[is]takenoftheobjectivessetout

inArticle39’.

(iii) In a 2009 communication on fair trade the European Commission ‘welcomed’ ‘schemes

thatguaranteeaminimumpricetofarmersindevelopingcountries’statingthatafairprice

wasone‘guaranteeingafairwagecoveringthecostsofsustainableproductionandliving’.

Surely,ifthesearethecriteriatodeterminewhatisconsideredtobea‘fair’price,itisnot

a big step to consider that prices which do not meet these criteria are ‘unfair’ (and

thereforepotentiallyan‘abuse’underArticle102)?81

(iv) Yes, it is difficult to determine what is a ‘fair’ purchase price (what is a reasonable

markup?). Yes, the competition authorities and courts are (quite rightly) reluctant to

becomepriceregulators.Butauthoritiesandcourtsalreadycondemnsellingpricesbothas

excessivelyhigh(an‘exploitative’abuse)82andasunacceptablylow(whetheraspredatory

orotherwiseexclusionary).83These issuesaredifficult (andauthoritiesandcourts should

onlyintervenewithcare)buttheconceptualissuesraisedbyunfairpurchasingpricesand

unfair selling prices are very similar. Just as the law has developed around what is an

unfairly high (‘excessive’) selling price, or unfairly low (‘predatory’) selling price, so too

couldrulesbedevelopedtodeterminewhatisanunfairlylowpurchaseprice.84

79See(n76).80Eg, theconceptof fairnessand faircompetitionwasamajordriverof theUSShermanActof1890.ForadiscussionoffairnessandantitrustseeHorton(n15)andseesectionVIII.ix.‘Isitalltoodifficult?’and(n137).81https://www3.fairwear.org.82Eg,NappPharmaceuticalsHoldingsvDGofFairTrading[2002]EWCACiV796.83ForanexampleofpredatorypricingseeAkzoNobelvEuropeanCommission[2010]C-550/07PandIntelforanexampleofexclusionarypricingIntelvCommission[2017]C-413/14P.84EconomistsandaccountantswouldnodoubtplayamajorroleinthisbutIwouldanticipatethatthestartingpointwould be somemeasure of total costs up the production and shipping chain and some concept of areasonableprofit.Ideally,theseshouldreflectcoststhatareoftentermed‘externalities’(egtheenvironmentaldamagecausedbytheproduct)butitmaybethatthiselementisbestdealtwithbymeansofregulation(eganobligationtoincludeitinaspecifiedwayinpurchasecosts)ratherthandealtwithonanadhocex-postwayunderArticle102.

36

(v) Iamnotsuggesting thatpurchasepricesnegotiatedby retailers shouldbeattackedona

regularbasis. First, the issueonly arises if apurchaserholds adominantposition (either

individually or, exceptionally, collectively) – which is rarer than people often realise.85

Second,justasitisdifficulttoestablishthatasellingpriceis‘excessive’86orpredatoryitis

likelytobedifficulttoestablishthatalowpurchasepriceis‘unfair’.Forthesereasonsitis

likelythatwherethereisasystemicproblem(egthelowpricespaidbytheglobalnorthto

producers intheglobalsouthforprimaryproductssuchascocoa,coffeeorbananas, the

issuewillgenerallybebettertackledthroughlegislation.)87However,whereforavarietyof

reasons, regulationdoesnotprovidea sufficient solution, there isno reason inprinciple

whyArticle102cannotbeinvoked.

(vi) We are not alone. In particular, concerns have been expressed by the European

Parliament’sEconomicandMonetaryAffairsCommitteeoverunfairandunsustainablelow

pricespaidtofarmers:

a. ‘theconceptofa“fair”priceshouldnotberegardedasthelowestpricepossiblefor

theconsumer,butinsteadmustbereasonableandallowforthefairremuneration

ofallpartiesalongthefoodsupplychain’.

b. ‘Consumers have interests other than low prices alone, including animal welfare,

environmentalsustainability…’

c. ‘Greateraccount[should]betakenofthevalueof“publicgoods”infoodpricing’.

d. ‘EU competition policy [should] look beyond the lowest common denominator of

‘cheapfood‘.

e. ‘Thecostsofproductionmustbetakenfully intoaccountwhenagreeingprices in

contracts between retailers / processors and producers with the intention of

ensuringpricesthatatleastcovercosts’.

(emphasisadded)

Paragraph78ofthe2018AnnualReportonCompetitionPolicy.

Notealsothat thisapproach isentirelyconsistentwiththenaturalmeaningofconsumer

welfarediscussedinsectionIViii.above.

(vii) Another(moreradical)wayoftacklingthis issuemightbetotreatthesubsequentselling

priceaspredatory;ieaftertakingintoaccountallthe‘true’upstreamcostsofproduction

and supply (as discussed in n84 and n 33) but otherwise applying the usual rules on

predatorypricing(as,forexample,setoutbytheCJEUinAkzo).88Thiswillnotbeeasybut,

giventheimportanceoftheissue,itmeritsfurtherconsideration(progressiveeconomists,

pleasenote).

85 Eg, it is unlikely to reduce the difficulty of low prices paid by supermarkets in the UK for milk or bypurchasersgloballyforbananas,coffeeorcocoa.Onthisseealso(n35).86See,eg,UKCompetitionAppealCourt’sjudgementin‘FlynnPharmaLtdandFlynnPharma(Holdings)Ltdv

CMA[2018]CAT11.87 A clear example of this is the EU’s recent directive on unfair trading practices in business to businessrelationships in the agricultural and food supply chain. This contains new rules that ban, for the first time,certain unfair trading practices imposed unilaterally by one trading partner on another (Directive (EU)2019/633onUnfairTradingPracticesinBusiness-to-BusinessRelationshipsintheAgriculturalandFoodSupplyChain (2019) OJ L111/59). In addition, many (most?) EU member states have legislation on unfair tradingpractices(egtheUKandItaly).Furthermore,somecountries(egGermany)havelawsanalogoustoEUlawonabuseofdominancewhichdealwithbehaviourwhereonecompanyhassignificantmarketpowerrelativetoothers.88See(n83).Seealsothediscussionof‘TrueCosts’(n133).

37

(viii) It isalsoworthnotingthatnationalcompetitionregimeshaveacknowledgedtheneedto

tackleabusesbysuppliers.Forexample,theItalianCompetitionAuthorityhasbeengiven

powertopunishconductresultingin‘anunwarrantedexerciseofbargainingpoweronthe

demandside’.89

(ix) Althoughbeyondthescopeofthispaper,onecouldpotentiallyseeArticle102beingused

as a ‘sword’ to attack awide range of breaches of international standards including the

exploitation of child labour, environmental depravation, human rights, etc In many

instances,themostobviouswaytodealwiththeseissuesisbyregulationbut,inprinciple,

thereisnoreasonwhyArticle102shouldnot‘plugthegaps’.Notonlywouldsuchusebe

consistentwith theCJEU’s acceptance that the categories of abuse arenot closed,90 but

thisapproach fitswithour innatesenseofwhatanabuseofpower is. Indeed,givenour

naturalsenseofwhatis‘fair’oran‘abuse’ofpoweritisperhapssurprisingthatsomuchof

the focus in the past has been on ‘exclusionary’, rather than, ‘exploitative’ abuses.

Furthermore, 3 of the 4 types of abuse listed in Article 102 are exploitative rather than

exclusionary.This ishardlysurprisinggiventhatcompetition lawandpolicy issupposedly

concernedwithprotectingconsumers(andthisregardlessofwhethera‘consumerwelfare’

standard isespoused). Is itnot time to rethink thebalanceand tacklemore ‘exploitative

abuses’?

VI.ii.Sustainabilityasa‘shield’againsttheuseofArticle102

Sustainabilitycouldalsobeusedmoreasa‘shield’againstArticle102whereadominantcompany

(orexceptionallycompanieswhicharecollectivelydominant)engageinproportionatebehaviourto

tackleenvironmentalorclimatechange issueswhichmightotherwisebeconsideredtobeabusive

(andthereisnowayofachievingtheseobjectivesinawaythatislessrestrictiveofcompetition):ie

thereisan‘objectivejustification’forbehaviourwhichisprimafacieabusive.91

ThereisastrongcaseforthiswhenArticle102isreadinthelightoftheconstitutionalprovisionsof

thetreatiesconsideredinsectionIVabove.Inparticular:

• the goal in Article 3 of the Treaty on European Union of a ‘high level of protection and

improvementoftheenvironment’;and

• theclearrequirementinArticle11TFEUthat‘environmentalprotectionrequirementsmust

beintegratedinto[allEU]…policiesandactivities’(emphasisadded).

89Article62oftheLaw27/2012.90cFAstraZeneca(n76).This,ofcourse,worksbothwaysandArticle102could(andshould)alsobeusedtoattack“greenwashing”.ForexampletheItaliancompetitionauthorityrecentlyfoundENIguiltyof“greenwashing”whenitmademisleadingenvironmentalclaimsaboutitsdieselfuel.Thepracticewasfoundtobean“unfaircommercialpractice”but,potentially,Article102(oritsnationalequivalents)couldbeinvoked.https://mlexmarketinsight.com/insights-center/editors-picks/energy-and-climate-change/europe/eni-fined-by-antitrust-watchdog-in-italys-first-greenwashing-case.91 For a discussionof these issues seeChapter 9 of Kingston (n 25) – particularly, p 304-312; She identifiesthreecategoriesof‘objectivejustification’:(1)whereadominantcompanytakes‘reasonablesteps’toprotectits commercial interests; (2) if the efficiencies justify the conduct such that there is ‘no net harm toconsumers’;and(3)legitimatepublicinterestgrounds.

38

Although thereare fewdecidedcasesofdirect relevance, the followingmightbe instanceswhere

environmental considerations might provide an ‘objective justification’ for conduct that might

otherwisebeabusive:

(i) chargingahigherprice inorder tocoverenvironmentalcostsor reinvest inenvironmental

protection92:ieasadefencetoallegationsofexcessivepricing;

(ii) chargingdifferent customersdifferentprices according to theuse towhich theproduct is

put – eg how environmentally friendly it is (eg the energy efficiency of the downstream

productionprocess);ieasadefencetoallegationsofdiscriminatorypricing;

(iii) making the purchase of one product from the dominant company conditional on the

purchaseofanotherenvironmentallyfriendlyproduct(egsaleofaprinterconditionalonthe

purchaseofrecyclabletonercartridges)93:ieasadefencetoanallegationoftying.

(iv) Offeringexceptionallylowpricestogeneratetrialofanewenvironmentallyfriendlyproduct:

ieasadefencetoanallegationofpredatorypricing.

(v) Refusingtograntaccesstoanessentialfacilitytoauserwhointendstousethefacilityforenvironmentally unfriendly purposes (eg denying access to diesel vehicles – provided this

was done on a non-discriminatory basis): ie as a defence to an allegation of refusal to

supply.94

What I hope the above examples illustrate is that it should not be necessary for a dominant

company to justify its actions on the basis of its own commercial (ie profit seeking) interests.

Providing the usual principles for an objective justification aremet (notably that there is no less

restrictive way of achieving the objective in question) it should be sufficient to show a genuine

environmental(orothersustainability)objective.

Dominant companies should not be discouraged from ‘doing the right thing’ or trying tomake a

contribution to combat climate change for fear of the competition law consequences. This is

important as dominant companies are often (not always) large multinationals which have the

economicclouttomakearealdifference.95

92 This approach would be consistent, not only with the ‘polluter pays’ principle, but also the approachsuggested above in relation to challenging abusively low prices for failing to properly reflect environmentalcosts(seesectionVI.i.).93Althoughitwouldbenecessarytoshowthattherewasnolessrestrictivesolution.Forexample,thismightmeanrequiringthattheenvironmentallyfriendlyproductwasboughtbutnotnecessarilyfromthedominantcompany.94ForafurtherdiscussionofhowenvironmentalconsiderationsmayberelevanttoindividualabusesseeKingston(n25),p312-326.95 Note, eg, Business Roundtable, ‘Statement on the Purpose of a Corporation’ (August 2019),<https://opportunity.businessroundtable.org/wp-content/uploads/2019/12/BRT-Statement-on-the-Purpose-of-a-Corporation-with-Signatures.pdf> accessed 18 January 2020 (Business Roundtable represents UScompanieswithamarketcapoftrillionsofdollars).Theirstatementincludesacommitmentto:

• ‘dealingfairlyandethicallywithoursuppliers’;andto• ‘protecttheenvironmentbyembracingsustainablepracticesacrossourbusinesses’.

Initselfthisistobecommended.Thatsaid,thelatest‘ResponsibleBusinessTracker’ofUKcompaniesfoundthatwhile86%ofthosesurveyedhada‘purposestatement’only17%hadaplantomakesureitwaspractisedateverylevel[“BusinessintheCommunity:responsiblebusinesstracker”].Anotherexampleistheso-called‘BCorps’, companies which have made a legal commitment to maintain certain minimum social andenvironmentalstandards(certifiedby‘BLab’,aglobalnotforprofitorganisation).AsofJune2019therewereover2,750certifiedBCorporationsacross64countries.Foradiscussionastowhether‘companies[are]right

39

Whilewearerighttobescepticalaboutsomecompanies‘greenwashing’therearecompanies(and

certainly many many individuals within companies) which are genuinely trying ‘to make a

difference’. Competition law should not make it more difficult to put these good intentions into

practice.AllowingArticle102toactasa‘shield’may,insomecircumstances,assistwiththis.

VII. MERGERS

Inthissection,Iwillconsiderhowsustainabilityandclimatechangeissuescan,andshould,betaken

into account in the assessment of mergers. I would suggest there are five options under the

Europeansystemofmergercontrol:

(i) In the substantive assessmentof themerger underArticle 2 of the EUMergerRegulation

(‘EUMR’);96

(ii) Whenconsidering‘efficiencies’undertheEUMR;

(iii) Whenconsidering‘remedies’;

(iv) UnderArticle21(4)oftheEUMR;and

(v) Whenmergersarereviewedundernationalcompetitionlaw.

Iwillcommentoneachoftheseinturn.

VII.i.TheSubstantiveReviewofMergersunderArticle2

Article2(1)of theEUMRsetsout thecriteriawhichtheCommissionmust take intoaccountwhen

decidingwhethertoapprove,ornottoapprove,amerger.Thesecriteriaincludethe‘development

of technical andeconomicprogressprovided that it is to the consumers’ advantageanddoesnot

formanobstacletocompetition’(Article2(1)(b)).

The language here is similar to that in Article 101(3) discussed in section V iv. above and, for

essentially the same reasons, not only can, but must, take into account (where appropriate)

environmental and sustainability issues. As previously argued this is very clear from the

‘constitutional’provisionsdiscussedinsectionIV.above,aviewconfirmedbyrecital23oftheEUMR

whichsaysthat‘theCommissionmustplaceitsappraisalwithintheframeworkoftheachievement

ofthefundamentalobjectivesreferredtointhe[constitutionalprovisions]ofthetreaties’.97

Thisshouldworkbothways.Mostobviouslyitmeansthatpositiveenvironmentalfactorscanplaya

part in clearing deals (ie concluding that the merger ‘would not significantly impede effective

competition’ – ie there is no ‘SIEC’). Logically, but more controversially (and, certainly more

exceptionally), itcanplayapart incomingtoaconclusionthatadealshouldbeblocked–oronlytoabandontheshareholderfirstmantra?’seetheFinancialTimeseditionofthe26thofAugust2019frompage11onwards.SeealsoAndrewHill, ‘TheLimitsof thePursuitofProfit’,FinancialTimes (24September2019)<https://www.ft.com/content/c998cc32-d93e-11e9-8f9b-77216ebe1f17>accessed18January2020.96CouncilRegulation(EC)139/2004onthecontrolofconcentrationsbetweenundertakings(theECMergerRegulation)[2004]OJL24(EUMR).97Recital23oftheEUMRreferstotheconstitutionalprovisionofthetreatiesastheythenstood(Article2oftheTreatyontheECandArticle2oftheTreatyontheEU).Forthe‘constitutional’provisionsastheycurrentlystandseesectionIVand,inparticular,Article11TFEU.

40

cleared subject to remedies (ie themerger ‘would significantly impedeeffective competition’ – ie

thereisaSIEC).98

IarguethatthisworksbothwaysasArticle2oftheEUMRiscompletelyneutralonthispoint.Unlike

Article101TFEU,Article2oftheEUMRisnotintwoparts.Itdoesnotsay‘iftherewouldbeaSIECa

mergermayneverthelessbeclearedifthereiscompensatorytechnicaloreconomicprogress’,etc.

Onthecontrary,whetherornotthereis‘technicaloreconomicprogress’,etcisafactorwhichthe

Commission‘shouldtakeintoaccount’inmakingits‘appraisaloftheconcentration’astowhetherit

is‘compatiblewiththecommonmarket’–ieinmakingtheinitialdeterminationastowhetherthere

is,orisnot,aSIEC.99Indeed,inparagraph76oftheHorizontalMergerGuidelines,theCommission

(quite rightly) says it ‘performs an overall competitive appraisal of the merger’ and that this

includestakingintoaccountthe‘developmentoftechnicalandeconomicprogress’.100

Inpractice,however,Iacceptthatenvironmentalandsustainabilityfactorsaremorelikelytoplaya

part in clearing deals that contribute positively to the environment (than in contributing to deals

beingblockedwhicharefeltlikelytoharmtheenvironment).Therearethreeinter-relatedreasons

forthis:

(i) Inpractice, theCommissiontendstoanalysefactorssuchasenvironmentalbenefitsunder

the heading ‘efficiencies’ (discussed at Part 2, below)’ : ie they are essentially taken into

accountafteraprimafaciefindingofaSIEC(ieasifitwereatwo-parttestàlaArticle101).

(ii) Mergercontrolisaprospectiveanalysisanditisnecessarytoanalysethelikelyfutureeffects

ofamerger.Whilethisisamatterofevidenceandproofonacase-by-casebasis,Iexpectit

willbeeasiertosatisfyacompetitionauthorityorcourtofthelikelyenvironmentalbenefits

ofamergerthanofthelikelyfutureenvironmentalharms.101

(iii) Probably reflecting the above, the Commission recentlymade some comments hostile to

takingintoaccountenvironmentalandclimatechangefactorsasabasisforchallengingthe

Bayer/Monsantodeal.102

98 Under Article 2(2) and 2(3) of the EUMR, the Commission must determine whether the merger is‘compatible with the Common Market’. This, in turn, depends on whether or not the merger (or‘concentration’)would‘significantlyimpedeeffectivecompetition’(‘SIEC’).99See(n98).100EuropeanCommission, ‘GuidelinesontheAssessmentofHorizontalMergersunderCouncilRegulationontheControlofConcentrationsbetweenUndertakings’[2004]C31/03.101OnthisseethediscussionsectionV.ivCondition2atB(ii).102TherewaswidespreadoppositiontotheBayer/MonsantodealbyenvironmentalNGOsandawiderpublicon the basis of environmental and climate change concerns. Commissioner Vestager responded that ‘whiletheseconcernsareofgreatimportance,theydonotformthebasisofamergerassessment’,arguingthatsuchconcerns ‘are handled bymy colleagues and national authorities and are subject to European and nationalrulestoprotectfoodsafety,consumersandtheenvironmentandclimate’,MargetheVestager, ‘CommissionLetter on Monsanto/Bayer’ (Brussels, 22 August 2017)<https://ec.europa.eu/competition/mergers/cases/additional_data/m8084_4719_6.pdf> accessed 18 January2020. Imakenocommentastowhether, inthisparticularcase,shewasrightthatthesematterswerebestdealtwithbyothermeansbut,asshownabove, the idea that risks to theenvironmentandclimate ‘donotform [part of] the basis of a merger assessment’ is contrary to Article 2 of the EUMR – especially whenproperly read in the lightof the constitutional provisionsof the treaties (see IV.).Bayer /Monsanto [2018]M.8084. For a Commission perspective on this case, see European Commission, ‘CompetitionMerger Brief’(2018)2/20186, <https://ec.europa.eu/competition/publications/cmb/2018/kdal18002enn.pdf>accessed18January2020.Foracriticalviewofthedeal,seeIoannisLianosandDmitryKatalevsky,‘MergerActivityinthe

41

Theabovesaid, there isconsiderableevidencesuggestingthatmergersrarelyachievetheclaimed

benefits103andthereisincreasingconcernoverrisinglevelsofconcentrationinmanyindustries(and

somemarkets).104Whilethisisavastandcontroversialtopicbeyondthescopeofthispaper,Iwould

onlynoteherethatweshouldprobablybelessafraidof‘Type1Errors’105(resultingfromblockinga

deal or clearing it subject towide-ranging conditions) thanwehavebeen in thepast (particularly

bearinginmindhowfewdealsareactuallyblocked).106

VII.ii.EnvironmentalFactorsas‘Efficiencies’

As mentioned above, the Commission tends to analyse (positive) environmental factors as

‘efficiencies’ to see if they might ‘counteract the effects on competition, and in particular the

potentialharmtoconsumers,that[themerger]mightotherwisehavehad’.107

At paragraphs 78 to 88 of its Horizontal Merger Guidelines, the Commission sets out the three

cumulative conditions that ‘efficiency claims’ must satisfy if they are to lead to a merger being

cleared:theyhavetobenefitconsumers,bemerger-specificandbeverifiable.Afewbriefwordson

each:108

(a) BenefitConsumers109

As argued in considering the second condition of Article 101(3) in section V iv. above,

environmental benefits and action to combat climate change are clear consumer benefits

andshouldbetakenintoaccountundertheEUMRforthesamereasons–withappropriate

weight being given to both the legal requirements of the constitutional provisions of the

treatiesandthemoralimperativetofightclimatechange.

(b) Efficienciesmustbe‘mergerspecific’

Factors of Production Segments of the Food Value Chain: A Critical Assessment of the Bayer / MonsantoMerger’ (2017) Policy Paper Series (or its summary here:<https://www.ucl.ac.uk/laws/sites/laws/files/redrafted-baysanto-report-summary_final.pdf>).103 See,eg,BruceABlonigenand JustinRPierce, ‘Evidenceof theEffectsofMergersonMarketPowerandEfficiency’ (2016) National Bureau of Economic Research, No w22750<https://dx.doi.org/10.17016/FEDS.2016.082>accessed19January2020.ThisfoundMergersandAcquisitions‘significantlyincreasemark-upsonaveragebuthavenostatisticallysignificantaverageeffectonproductivity’.Otherstudieshaverepeatedlyshownthatmergersarevaluedestroyingfromtheperspectiveoftheacquiringstakeholders.104See,eg,JanDeLoeckerandothers‘TheRiseofMarketPowerandtheMacroeconomicImplications’(2017)NBERWorkingPaperNow23687,<https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3023087>accessed19January2020.105Ietheprohibitionofamergerthatisnotanti-competitive.106 Eg, over the period 21 September 1990 to 31 July 2019 (over 29 years) the Commission received some7,414notificationsofmergersofwhichonly30(or0.04%)wereprohibitedunderArticle8.3EUMR.Afurther447(or6%)wereclearedsubjecttoremediesineitherphase1orphase2(source:EuropeanCommission).Fortheavoidanceofdoubt,IwouldemphasizethatIaminnoway‘anti-merger’Thisisdespitetheargumentthatmergersleadingtolowerpricesarelikelytoleadtomoreconsumptionandtheuseofmoreresources-partlyreflectingmyscepticismastowhethermergersdoinfactleadtolowerprices(n103).Lowerprices,inandofthemselves,goontheplussideoftheequation.Mypointissimplythatoverenforcementissimplynotasignificantriskincurrentmergercontrol.107SeeRecital23oftheEUMR.108Forafurtherdiscussionofthese,seeKingston(n25),p332-340.109Paragraphs79to84oftheHorizontalMergerGuidelines.

42

IntheCommission’swordsthismeanstheefficienciesmustbe‘adirectconsequenceofthe

notified merger and cannot be achieved to a similar extent by less anti-competitive

alternatives’.110 This last element is similar to the ‘no more restrictive than necessary’

consideration in Article 101(3)111 and can be seen as an expression of the proportionality

principle. It is an important (and I would suggest legitimate) limitation on the extent to

which environmental concerns can ‘justify’ amerger as theremaywell be less restrictive

meansofachievingthesameenvironmentalobjectives.

(c) Efficienciesmustbe‘verifiable’112

TotheextentthatthissimplymeansthattheCommissionmustbe‘reasonablycertainthat

theefficienciesarelikelytomaterialise’thisisalegitimatelimitationontheextenttowhich

environmental factors can justify a merger. That said, given that many environmental

benefits (and evenmore so initiatives to combat climate change)may take some time to

materialise (and can be difficult to quantify) it is important: (i) to avoid taking an overly

narrowfinancialapproach(andthatestimatesandvalue judgementsaremade);113and(ii)

thattheoverridingobjectivesofthetreaty(assetoutinthe‘constitutional’provisions)are

keptinmind.

This prompts a concluding criticism of the approach to environmental factors as ‘efficiencies’. As

mentionedabove,theCommissionproceedsasiftherewasatwo-parttestundertheEUMR:iefirst

afindingofacompetitionproblem;secondafindingof‘efficiencies’thatmightcounteractthis.The

problemwiththisapproach is that itappearstoswitchtheburdenofproof: ‘it is forthenotifying

parties to show to what extent the efficiencies are likely to counteract any adverse effects on

competition that might otherwise result from the merger, and therefore benefit consumers’.114

Whileitisacceptedthatitisforthepartiestoproviderelevantfactsandotherevidenceinrelation

totheassessmentoftheappraisalofthedealunderArticle2oftheEUMR,theoveralllegalburden

ofproofstilllieswiththeCommissionifitistoblockadeal.115

VII.iii.Remedies

Manymergersareapprovedonaconditionalbasis–iesubjecttotheacceptanceofremediesbythe

competition authorities.116 One way of taking account of potential negative effects on the

environment of a merger might be to include in the remedy package measures to counter the

negativeeffectson theenvironment identified in thecourseof the substantiveassessmentof the

dealunderArticle2EUMR(particularlyArticle2(1)(b)).117

110Paragraph85oftheHorizontalMergerGuidelines.111SeesectionViv.Condition3above.112Paragraphs86to88oftheHorizontalMergerGuidelines.113SeethediscussionatsectionV.iv,Condition2re:consumersreceivinga‘fairshareoftheresultingbenefit’and, in particular, the extracts from the Commission’s ‘2004 Exemption Guidelines’ (n 26). Note also thediscussion ‘is it all toodifficult?’ in sectionVIII and the reference there tomodernenvironmental valuationtechniques(atVIII.vii).114Paragraph87oftheHorizontalMergerGuidelines.115See,eg,EDPv.Commission[2005]T-87/052005II-03745.116SeeArticle6(2)andArticle8(2)oftheEUMR.117Onremediesgenerally,seeEuropeanCommission,‘NoticeonRemediesAcceptableunderCouncilRegulation(EC)No139/2004andunderCommissionRegulations’[2008]C267/01.

43

Forexample,anefficiencyenhancingmergermightleadtoproductionbeingfocusedinafactoryin

regionA,ownedbyonemergingparty,withtheplantownedbytheothermergingpartyinregionB

closingdownwithasignificantlossofemploymentinthatregion.Aremedypackagemightinclude

(i) measures in region A to counter the environmental damage from increased freight traffic,

increased emissions and increased noise; and (ii) (more controversially) measures in region B to

retrainor redeployworkersmaderedundant there. In thisway, thepositiveeffectsof themerger

canbeachieved(whichwouldnotbethecaseifthemergerwasblocked)andthenegativeeffects

minimised118.

Itmightbehelpfulforguidelinestobedrawnuptodealwithsuchremedies,mostobviouslyinthe

Remedies Notice – see n 117). Indeed, thesemight be similar to the Commission’s guidelines on

‘efficiencies’discussedatpointiiaboveinthattheyshould:

5 ‘benefitconsumers’-andperhapsexplicitlyotherstakeholders,notablyemployees;

6 be‘mergerspecific’inthattheharmsbeingremediedmustbeadirectconsequenceofthe

merger(toputitanotherway,theremediesmustbe‘nomoreextremethannecessary’to

remedytheharmlikelytobecausedbythemerger);and

7 the harms being remedied must be ‘verifiable’ (allowing for the uncertainties of a

prospectiveanalysis).

Suchanapproachwouldbeconsistentwiththe ‘balancingact’andtheprincipleofproportionality

discussed in section IV.: ie allowing mergers to proceed but dealing with the problems they

nonetheless cause. This is also less radical (and hopefully more acceptable, politically) than an

approachthatsayssuchmergersshouldbeblocked.

Three aspects of the Commission’s practice on remedies merit comment in the context of

‘environmentalremedies’:

(i) Remediestodealwithlikelynegativeenvironmentaleffectofamergerwouldoften(butnot

always) take the form of a so-called ‘behavioural’ remedy (eg a commitment not to

introduce certain ‘bad’ environmental practices of the acquirer into the business of the

target).TheCommissionhasrepeatedlystatedapreferenceformore ‘structural’ remedies

sayingthattheywillaccept‘non-divestitureremediessuchasbehaviouralprovisions,onlyin

specific circumstances’.119 In practice, however, the Commission has often accepted

behavioural remedies (particularly as part of a package of remedies).120 Furthermore,

whether or not a remedy is accepted depends, not on the form it takes, butwhether (in

combinationwithanyotherelementsoftheremedypackage)itdoes,ordoesnot,eliminate

theconcernsidentifiedinthecourseoftheappraisaloftheconcentration.121Themorethis

118AnexampleofacasewhereamergerhasbeenallowedbutonlysubjecttobehaviouralremediestodealwiththepotentialadverseeffectsofthemergeristhemergerbetweenMidKentWaterandSouthEastWaterwhichwasreviewedbytheUK’s(then)CompetitionCommission.Thebehaviouralremedywasdesignedtopreservethe‘waterresource’benefitsarisingfromthemerger.119See,eg,[69]oftheCommission’sRemediesNotice(n117).120Eg,PernodRicard/Diageo/SeagramSpirits[2001]Comp/M.2268].121 The CJEU has repeatedly stated that ‘behavioural commitments are not by their nature insufficient toprevent thecreationorstrengtheningofadominantposition,andtheymustbeassessedonacase-by-casebasis in thesamewayasstructuralcommitments’,eg inEDPvCommission [2005]T-87/05 II-03745at [100]andcasescitedthere.

44

appraisal takes proper account of environmental and sustainability considerations (in

accordance with the constitutional provisions of the treaties), themore likely it is that a

remedyincludingenvironmentalorothersustainabilityconcernswillbeappropriate.122

(ii) ItisestablishedCommissionpracticethat,beforeremediescanbeofferedandaccepted,‘it

is the responsibility of the Commission to show that a concentration would significantly

impedecompetition’andthattheCommission‘isnotinapositiontoimposeunilaterallyany

conditionstoanauthorisationdecision’.123

Inpractice,thepositionismuchmorefluidandthepartieswilloftenofferaremedytodeal

with anticipated or expressed concerns of the Commission. It remains the case, however,

thattheeventualconditionalclearancewillstatethataSIECwasinitiallyfoundbutthatthe

concernsidentifiedwereremovedbytheremediesoffered.

Arguably,however,this isnotnecessaryundertheEUMR.Article8(2)oftheEUMRsimply

states that ‘where the Commission finds that, followingmodification by the undertakings

concerned [ie by the offer of remedies] a notified concentration fulfils the criterion laid

down in Article 2(2) [ie that there is no SIEC] … it shall issue a decision declaring the

concentrationcompatiblewiththecommonmarket’.

There is nopre-requirement in the EUMR itself that a SIEC is foundbefore the remedy is

takenintoaccount,onlythatthereisnoSIEC,aftertakingintoaccounttheremedy.124This

suggeststheCommissionhasagreaterdiscretiontoacceptremediesthanisgenerallyfeltto

bethecase.

(iii) While the above point may be controversial, what is already well accepted is that the

Commission has more scope to accept remedies in phase 1 of the EUMR as these are

designedtoremovethe‘seriousdoubts’aboutthemergerthattheCommissionhasatthe

endofphase1.125Forthisreason,remediesofferedinphase1(toavoidaphase2)maybe

more extensive than those whichmight have been considered necessary at the end of a

phase2.Whereappropriate, thesecould includeremedies to removeany ‘seriousdoubts’

abouttheenvironmental(orother)impactofthedeal.

122Paragraphs9to14oftheRemediesNoticediscussesthe‘basicconditionsforacceptablecommitments’.123See[6]oftheRemediesNotice.124 Iamnotawareofanyjudgementofthecourtonthispoint.Thereare,however,somecommentsbytheCJEUwhichcouldbereadtosuggestthattheremedycanbenomoreextensivethannecessarytoremedythecompetitionconcernsidentified,see,eg,paragraphs93and95ofEDPvCommission(n121).However,(i)thepartieshadacceptedinthatcasethattherewasaSIECsothecourtdidnothavetodecidewhetheraSIECwasapre-condition toa remedy;and (ii)anycommentsonArticle2andremedieswereobiteras thequestionsasked of the court concerned an alleged ‘abuse of power’ and not an alleged breach of Article 2. In thiscontext, I also note that the CJEU (and its predecessor) has expressly confirmed in antitrust cases that theCommissionisentitledtoaccept‘commitments’underArticle9ofRegulation1/2003incircumstanceswhereitwouldnothavebeenentitledtoimposesuchmeasuresunderArticle7ofRegulation1/2003(egCommission

vAlrosa[2010]C-441/07P,paragraphs46and48-50).ApossibleobjectiontothisanalogyisthatthepurposeofArticle7 is tobringan infringement toanend,whereasadecisionunderArticle9 is intendedtoaddressconcernstheCommissionhasraisedfollowinga(so-called)‘preliminaryassessment’arguablyanalogoustothe‘seriousdoubts’whichtheCommissionmayhaveattheendofaphase1reviewundertheEUMR–seesectionVII.iii(iii)above.Itisnoteworthy,however,thatcommitmentsacceptedunderArticle9ofRegulation1/2003(whicheffectively‘clear’arrangementsbeinglookedatunderArticle101or102)areoftensimilartoremedieswhicheffectively‘clear’adealundertheEUMR.125SeeArticle6(2)oftheEUMRandparagraph6andfn4oftheRemediesNotice.

45

VII.iv.Article21(4)oftheEUMR

Article21(4)oftheEUMRallowsmemberstatestotake‘appropriatemeasurestoprotectlegitimate

interests’otherthancompetitionconcerns.Theseconcernsmusteitherfallwithinthosespecifiedin

Article 21(4) itself (‘public security, plurality of themedia and prudential rules’) or be ‘any other

public interest’which has first been communicated to the Commission by themember state and

‘recognised’bytheCommission.

Thereisnoexpressreferencetoenvironmentalprotection,sustainabilityorclimatechangeherebut

therearethreewaysinwhichthesemightbetakenintoaccountunderArticle21(4):

(i) theymightfallwithinoneofthecurrent‘legitimateinterests’–mostlikely‘publicsecurity’

(egtheneedtoensureasecureandsustainablesupplyofenergy).

(ii) A member state could apply to the Commission to have an

environmental/sustainability/climate change concern ‘recognised’ by the Commission as a

legitimateinterest.ThisshouldhaveagoodchanceofbeingrecognisedbytheCommission

giventhatit isrequiredbyArticle21(4)(thirdparagraph)tocarryoutan‘assessmentofits

compatibilitywiththegeneralprinciplesandotherprovisionsofcommunitylaw’.Thismust

include consideration of the constitutional provisions of the treaties which require that

environmentalprotectionandsustainabledevelopment ‘must’be taken intoaccount inall

Unionpoliciesandactivities(seeIV.above).

(iii) Article 21(4) EUMR could be amended to include an express reference to environmental

protection,sustainabilityand/orclimatechange126.

Finally,itmustbenotedthatArticle21(4)providesamechanismforamemberstatetoreviewand

potentiallyprohibitadealthatiscleared(conditionallyorotherwise)bytheCommissionunderthe

EUMR. Itdoesnotprovideanybasis foramember state toapproveadeal that isblockedby theCommission. In this sense it is a potential complement to Article 2 of the EUMR which I have

suggestedismorelikelytoleadtoamergerwithpositiveenvironmentaleffectsbeingclearedthan

toonewithnegativeeffectsbeingblocked(seeVIIiabove).

VII.v.NationalMergerControl

Where a merger does not fall within the EUMR, it may be reviewed under the national merger

controlrulesofoneormorememberstate.Theserulesmaytake intoaccountenvironmentaland

sustainabilityfactorstoagreater(orlesser)extentthanundertheEUMR.127Indeed,some(egSpain)

containexpressreferencetoenvironmentalissues.

126Inthiscontextitisnoteworthythatinitssubmissiontothe2010OECDReport(n3),p112theOFTnotedthat,althoughtheUKmergerregimeprovidesforministerstointerveneinmergerstoprotectcertainpublicinterestissues,thecurrentlistofissuesdoesnotincludeenvironmentalconcernsbutthatthese‘couldbeaddedtothelistbylegislation’.127 The EU Merger Working Group, ‘Public Interest Regimes in the European Union – Differences andSimilarities in Approach’ (Report), 10 March 2016,(<https://ec.europa.eu/competition/ecn/mwg_public_interest_regimes_en.pdf>, accessed 19 January 2020,foundthattherewere‘12jurisdictions[intheEU]wherewiderpublicinterestconsiderationscaneitherformpart of the merger control assessment or can otherwise feature in the overall business decision makingprocess’.

46

UnlikemeasurestakenbymemberstatesunderArticle21(4)EUMR(sectionVII.ivabove)mergers,

which are not reviewed under the EUMR, but under national rules, can (if national law permits)

either be blocked notwithstanding an absence of competition concerns or be allowed despite

competition concerns. A striking example of the latter is a decision of the German Economics

MinistryinAugust2019toallowtheMiba/Zollernjointventurethathadpreviouslybeenblockedby

theGerman Federal Cartel Office. Theminister ruled that the positive effects of the deal for the

environment and climate protection outweighed the competitive disadvantages of the merger

(citing noise reduction, reduced fuel consumption and, more generally, climate protection and a

sustainableenvironmentpolicy).128.

It is also noteworthy that various regimes outside the EU allow for a wider range of issues

(particularly social and sustainability concerns) to be taken into account. The best known (and,

arguably,themostprogressive)oftheseisSouthAfrica.129

128Theroleofpublic interest factorshasrecentlybeenstrengthenedastheywillnowbeacoreassessmentarea in merger control – whereas public interest was previously only a secondary area of assessment(CompetitionAmendmentBillB23B–2018).129MaximilianKonrad,‘MinisterialApprovalMiba/Zollern:AGreenIndustrialPolicyForMedium-SizedCompanies’(D’KartAntitrustBlog,20August2019)<https://www.d-kart.de/en/blog/2019/08/20/ministererlaubnis-miba-zollern-gruene-industriepolitik-fuer-den-mittelstand/>accessed19January2020.

47

VIII. Isitalltoodifficult?Itissometimessuggestedthatitistoodifficulttotakeintoaccountwiderissuesthannarrowshort-

termeffects(ordynamiceffects lookingprimarilyatprice)andthatcompetitionauthoritiesare ill-

equippedtodothis.Theanswertothisismanyfold.

(i) First,wehavetoapplythelawassetoutinthetreaties.Ifthatisdifficult,sobeit.

(ii) It is a dereliction of our duty as citizens (whether as lawyers, economists, judges or

competitionenforcers) toshyawayfromthatwhich is importantandfocusonwhat is

(oftenwrongly)perceivedtobeeasyorreadilymeasurable.130

(iii) Ifwedonotfocusontheissuesthatreallymatter,weriskdrivingcompetitionlawinto

irrelevance(andmanywouldarguethishasalreadyhappenedintheUS).

(iv) In any case, it can be incredibly difficult and complex to assess even short-termprice

effects. Anyone who thinks otherwise has either never been faced with hundreds of

pagesofconflictingeconometricevidence(Ihave)orisdeludingthemselves(orperhaps

both!).

(v) Thebalancingof(oftenconflicting)interestsisnoteasybutitisexactlywhatcourtsand

competitionauthoritiesalreadydo.Theprincipleofproportionality(mentionedseveral

timesalready) isagood illustrationof this.Thisbalancing requirement isevenwritten

intothethirdconditionofArticle101(3)(generallyreferredtoasthe‘nomorerestrictive

thannecessary’test).131

(vi) Whilewemayoftendisagreewiththeminindividualcases,competitionauthoritiesand

courtsareincreasinglywellequippedtocarryoutthissortofbalancingact.Notonlyis

anassessmentofevidence(bothqualitativeandquantitative)atthecoreoftheirwork,

theauthoritiesandcourtsareemployingpeoplewith increasinglydiversebackgrounds

130AsMaurice Stuckehasnoted: ‘antitrust analysis over thepast thirty years overstated the importanceofcompetitive dynamics that were easier to assess (productive efficiencies and short-term price effects) andmarginalisedor ignoredwhatwasharder to assess (dynamic efficiencies; systemic risk; andpolitical, social,and moral implications of concentrated economic power)’, Maurice Stucke, ‘Should Competition PolicyPromoteHappiness?’ (2012) 81 FordhamLawReview2575, <https://ssrn.com/abstract=2203533>, accessed19 January2020. Similarly, CommissionerKroeshasnoted ‘we cannot justwashourhandsof responsibilityand say that competition lawcannotor shouldnotprotect theconsumeragainstnegativemediumto long-term effects just because it is difficult to assess’ (Neelie Kroes, ‘Preliminary Thoughts on Policy Review ofArticle 82’, Speech, Fordham Corporate Law Institute, New York, 23 September 2005,<https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_05_537> accessed 19 January 2020).Furthermore, just because something is less certain does not mean that it can’t be taken into account.Uncertaintymayplayintothenatureoftheevidencerequiredinrelationtoit,butnotonlycanit,butitmust,betaken intoaccount intheanalysis.AstheChiefEconomistattheUK’sCMA,MikeWalker,hasnoted ‘thecurrentapproachseems tobe that it isbetter tobeexactlywrong thanroughly right. Ifwe treatconsumerwelfareinthewaythatyouwantto(whichmakessensetome)thenthebalanceofprobabilitiestestdoesnotallowustoavoidmakinglong-termuncertaindecisions.Competitionauthoritiesneedtobeclearaboutthis’(MikeWalker in correspondence with the author). He is right and this view is consistent with the helpfulcommentsbytheCommission inthe2004ExemptionGuidelinesreferredto insection V.ivunderCondition2(B)‘FairShareoftheResultingBenefits’atpoint(ii).131SeethediscussionofCondition3inV.Interestingly,theEuropeanCommissionitselfsaidinasubmissiontotheOECDin1966that:‘strikingabalancebetweencompetitionandenvironmentalpolicywas:

- relativelyeasy[inArticle101(3)]casesapplying- theprincipleofproportionality’

[OECDCompetitionPolicyandtheEnvironment(Paris,OECD1966at74).]

48

andskill-sets(ienotonlylawyersandeconomistsbutthosewithbackgroundsinfinance,

psychology,ITandawiderangeofbusinessesandindustries).132

(vii) Inanycase,takingintoaccountthefullrangeoffactorsrequiredbythetreaties(iemore

thanthenarrowlyconceivedconsumerwelfareeffects)isanythingbuta‘lesseconomic’

approach.Onthecontrary,itisanapproachwhichisfarmoreintunewiththeoriginal

(and better) meaning of ‘economics’ (see the discussion under ‘consumer welfare’ in

sectionIViii.above)

Agoodillustrationofthisisthewayinwhichtakingintoaccount(so-called)externalities

when looking at costs (see n 31) means that these costs reflect the true costs of

producing products (rather than a subset of them). They are therefore a better

reflectionofthetrueeconomiccostofthoseproducts.Inturn,priceswhichreflectthose

costsareabetterreflectionofthetruepriceofthoseproducts.133

It also provides opportunities to take account of the considerable developments in

recentyearsinbothtechnology(suchassatellites,sensors,drones,blockchainandAI)

which enable data to be collected and measured better, and in environmental

economics (such as new economic techniques for the valuation of the benefits from

environmental resources and initiatives).134 There is no more reason to ignore these

techniques than there is to ignore any other efforts to quantify the effects of an

agreement,mergerorallegedabuse,etc

Furthermore, therehavebeen a numberof caseswhere competition authorities have

used variousquantitative techniques in sustainability cases, thebest knownbeing the

Commission’sCECED135caseandthedecisionoftheDutchCompetitionAuthorityinthe

‘ChickenofTomorrow’case.136

132TheUK’sCompetitionAppealTribunalandCompetitionandMarketsAuthorityaregoodexamplesofthis.133Foranexcellentdiscussionof‘truecosts’and‘truepricing’seeTruePriceFoundation,‘ARoadmapforTruePricing.VisionPaper–Consultationdraft’(2019),<https://trueprice.org/a-roadmap-for-true-pricing/>accessed19January2020.Thispaperincludessomehelpfulideasonhowtodeterminea‘trueprice’intermsof:

• whichexternalcostsshouldbetakenintoaccount;• hownegativeexternalitiesshouldbequantified;and• howto‘monetise’them.

(See,inparticular,IV.ofthepaperanditsappendix).134ForaninterestingdiscussionoftheseissuesseeChapter5inKingston(n25).135See(n48).136 In the Chicken of Tomorrow case chicken producers came to an agreement to improve the welfare ofchickens(andtoreplace‘regular’chickenswiththe‘chickenoftomorrow’).TheDutchCompetitionAuthority(theACM)attemptedtoquantifythebenefitsoftheseimprovements(basedonaconsumersurvey)andfoundthattheimprovementscameatahighercost(1.45eurocentsperkilo)thanacombinationofwhatconsumerswerewillingtopay(68eurocentsperkilo)andthepositiveenvironmentaleffects(14eurocentsperkilo)(ieatotal of 82 eurocents). They therefore concluded that the potential advantages to animal welfare did notoutweighthereductionofconsumerchoiceandpotentialpriceincreasesandtheinitiativewasabandoned.Iwouldmakeoneobservation.Inthecaseofimprovementsinanimalwelfare,awillingnesstopaytestmaybethebestquantitativetestavailableinthecontextofanArticle103(3)analysis.However,whereclimatechange(andperhapsotherenvironmentalorsocial issues)areatstake, it isnecessarytoconsiderdynamicandlongterm effects-particularly future benefits to consumers and society (on which I note the comments of theEuropean Commission at paragraphs 87 and 88 of its 2004 Exemption Guidelines and its approach in theCECEDcasereferredtoin(n48).ForfurtherdiscussionsoftheChickenofTomorrowcaseseeLianos(n25),p26-28.

49

The above said, while there is a place for quantitative techniques, there is no

prerequisitetousetheminallcasesandestimatesand/oravaluejudgementareoften

morehelpful(seethediscussioninsectionV.iv.aboveofa‘fairshareforconsumers’and

theCommission’scommentsinits2004ExemptionGuidelines).

(viii) It is sometimes suggested that taking into account issues such as the environmental

impact of an agreement (or, indeed, a merger) will lead to the ‘politicisation’ of the

process.First,thereisnomorereasonfortheprocesstobe‘politicised’inthesenseof

competitionauthorities’ independencebeingcompromisedthanatpresent.Second,to

the extent that what is meant is that the authorities will receive submissions from a

wider range of interested parties (eg Environmental NGO’s) then that is a welcome

development.Largecorporatesspendmillionsonlawyers,economists,accountantsand

lobbyists (quite legitimately) arguing their case before authorities. If awider range of

interests are taken into account that can only ‘level the playing field’ and be for the

better – particularly bearing inmind the goals of the treaties discussed in section IV.

above.

(ix) Somehavesuggested that taking theconceptof ‘fairness’ intoaccount incompetition

analysisisnotpractical.Certainly,ithasitslimitations(andIwouldnotpretendthatitis

capable of being defined in any usefulway). However, as Commissioner Vestager has

said, fairness is about the ‘social rationale’ of competition principles and not their

applicationinindividualcases.Certainly,itdoesnotfollowthatjustbecausesomething

is ‘not fair’ that competition law is infringed (but then it isnot the case thatanything

that restricts competition infringes competition law). However, fairness is certainly

somethingtotakeintoaccountwhenbalancingdifferentfactorsandwhenapplyingthe

principleofproportionality.Itisalsoausefulsensecheckwhenlookingattheresultof

anycompetitionanalysis.Doesthisseemfair?Doesitlookright?Ifnothingelse,itmight

beaprompttolookagainattheanalysis137.

(x) Some have suggested that taking into account action to combat climate change is a

“slipperyslope”:iewhatelseshouldbetakenintoaccount?Wheredowestop?Ihave

somesympathywiththisconcernbutwouldmake2points.Firstassessotherissueson

theirownmeritsandapplythe lawinanopenmindedwaytosee if therelevant legal

testismet(egwhenlookingtoseeifthereis“improvement”,“progress”orcustomer

“benefit” in the sense of Article 101(3) or an” abuse” in the sense of Article 102).

Secondly,theclimatecrisisisanexistentialthreatandofadifferentorderofconcernto

others.Whateverthedifficultiesmay(ormaynot)beintakingintoaccountotherissues

andconcerns, thesemustnotbeusedasapretext fornot taking intoaccountclimate

changeconcerns.

(xi) Finally, and perhaps in desperation, those trying to resist taking into account

sustainability issues have even suggested it might be somehow ‘undemocratic’,

‘illegitimate’orcostlyforcompetitionauthoritiestotakesustainabilityintoaccount.The

answertothisisatleastfivefold:

(a) FirsttheEUtreatieswereenactedbydemocraticallyelectedgovernments(andwe

havetoapplythem-seesectionIV.);137Foradiscussionon‘fairness’seeHorton(n15)andDamienGerard,‘FairnessinEUCompetitionPolicy:SignificanceandImplications’,(2018)9JournalofEuropeanCompetitionLaw&Practice,211<https://doi.org/10.1093/jeclap/lpy027>accessed19January2020.

50

(b) Secondly,neithertheEUlegislativesystem,northeEuropeancourts(CJEU,General

Courtandtheirpredecessors)haseverruledinfavourofanarrowconsumerwelfare

viewofEUcompetitionlaw;

(c) Thirdly,forthemostpart,wearenotcallingonthecompetitionauthoritiesto‘work

on environmental matters’. More often, we are asking them not to intervene to

prevent agreements promoting sustainability which do not infringe competition

provisionswhenproperlyinterpretedinthelightoftheconstitutionalprovisionsof

the treaties. It is largely the private sectorwhich is called upon to act (consistent

with the comments by Commissioner Vestager at the Brussels Sustainability

ConferencefirstreferredtoinII.above).

(d) Fourthly, to the extent that a competition authority does spend time and effort

considering(eg)environmental issuesthenthis isonlytotheextentmandated(or

atleastpermitted)bythetreaties.

(e) Finally,thereisnogreaterchallengefacedbyhumanitythanclimatechangeand,as

CommissionerVestagerhassaid, ‘everyoneofus-includingcompetitionenforcers-

[is]calledupontomakeourcontribution’138.FurthermorePresidentUrsulavonder

Leyenhasput fightingclimateChangeat theheartofherprogramme.Soperhaps

timeandeffortcontributingtothataretimeandeffortwellspent.

Iwouldemphasise that I am innoway suggesting that competition lawshould replace regulation

whichwilloftenbethefirstchoicesolution(eglegislationonairpollution)ortheprudentsolution

(eg where it is difficult to get consensus and/or everyone comfortable with the competition

implicationsofinitiativesconcerningpriceorgivingrisetosignificantcommonalityofcosts).

Thatsaid, therearecircumstanceswherecompetition lawcanbeusedeitherasacomplement to

suchregulation,ortofillagapwhereregulationisinadequateinsomeway.Furthermore,thereisa

greatdeal that theprivate sector can (and should)do to fight climatechange issues.Often this is

bestdonebycompaniesworkingtogether(oratleastagreeingonvariousstandards)andweshould

alllooktominimisetheextenttowhichcompetitionlawobstructsthis.

138SeethecalltoarmsbyCommissionerMargretheVestager,‘CompetitionandSustainability’,Speech,GCLCConferenceonSustainabilityandCompetitionPolicy,Brussels,24October2019<https://wayback.archive-it.org/12090/20191129200524/https://ec.europa.eu/commission/commissioners/2014-2019/vestager/announcements/competition-and-sustainability_en>accessed19January2020.

51

IXSOMECONCLUSIONSANDPROPOSALSFORACTION

On the basis of the treaties, the current narrow approach to competition law is certainly not

inevitableandis, inmanyrespects, illegal.Evenmoreimportantly, it isanapproachthatcanoften

bedamaging froman environmental and sustainability perspective and, in particular, it is holding

back vital initiatives to combat climate change. In other words: competition law is part of the

problem.

Thegoodnewsisthatagreatdealcanbedonewithoutachangetothelaw(muchofthatwasdone

inthe1990s139–relativelyunnoticed–atleastbymanycompetitionlawyersandeconomists).

Essentially,whatisneededisachangeinthewaythatcompetitionlawandeconomicsareapplied.

Weneedtoremindourselvesconstantlythatcompetition(or,indeedthestudyofeconomics)isnot

anendinitselfbutameanstoanend,ameanstoachieveothergoals.140Wethereforeneedtolook

at the EU treaties afresh (both the competition provisions and the constitutional provisions) and

thinkagainaboutwhatcompetitionlawandeconomicsarereallyabout.

Whetherwe are lawyers, economists, academics, competition officials or judges,we need to ask

ourselveswhether the competitionworkweare (orhavebeen)doing is really achievingwhatwe

want it toachieve.AsCommissionerVestagerput it inherBrusselsCompetitionandSustainability

speech:’isthisreallythebestwecando?’Itmaybeachievingmanyofthethingsthatweendorse

(tackling harmful cartels and flagrant abuses of power, and approving some efficiency enhancing

mergers) but if it is also endorsing (directly or indirectly) environmental degradation and

unsustainablepracticesandstandinginthewayofvitalactiontofightclimatechangethenithasto

change–anditcan.

As argued throughout this paper, the most urgent change needed is to how we think about

competition and economics; to get away from a range of arcane, technocratic and unhelpful

concepts(suchasanarrowfocusonshort-termpriceeffects);andtogetbacktowhatourtreaties

(andtheirequivalentsinotherjurisdictions)actuallysay.141

ProposalsforAction

That said, despite very few cases having been brought against environmental or sustainability

agreements142,weliveinaconservative,risk-aversecultureanditwillalsobenecessaryto‘nudge’

the establishment in the right direction. A number of writers and reports have made detailed

proposalsinthisregard143butIwouldmentionjusteight:

139PrincipallybytheMaastrichtTreatyof1992andtheTreatyofAmsterdam1999.SeetheresultingprovisionsposttheTreatyofLisbon2009setoutinIV.140SeeIV.141Again,seeIV.142SeeegthecommentbytheUK’sOFTinthe2010OECDPaper(n3),p103:‘TheOFThasnotopenedanyinvestigationsintohorizontalagreementsincludingenvironmentalagreements’.143See,eg,the‘ConclusionsandPracticalSolutions’setoutin‘AddressingtheBrokenLinks’(n35)p50-54.Inparticular, this includes eight points which ‘recommend some practical solutions on how to embedsustainabilityconcernsintocompetitionlawfromaregulatoryandenforcementperspective’.Thesefallunder3headings: ‘interpretativechanges’; ‘institutional changes’;and ‘regulatorychanges’ (seep52-54).Seealso

52

1. PositiveStatementsbyCompetitionAuthorities.

Topofmy list ismorepositivestatements fromthecompetitionauthoritiesastowhatcanbe

donewithoutinfringingcompetitionlaw.Atpresentthereisaseriousanddamagingasymmetry:

business hears (quite rightly) what cannotbe done but rarely hearswhat can be done. Such

positivestatementscantakemanyforms.Forexample:

(a) Speeches like the recent speech of Commissioner Vestager cited many times in this

article;

(b) Pressreleaseswheretheauthorityhas indicatedthat itdoesnotseeaproblemwitha

particularinitiative(oratleastthatitdoesnotintendtotakeaction(sometimesagood

steer isgivenbehindcloseddoorsbut itwouldbehelpfultopublicisethisconstructive

approach);

(c) DecisionsconfirmingthatanagreementdoesnotinfringeArticle101(1)orthatitmeets

theexemptionconditionsofArticle101(3).Article10ofRegulation1/2003providesfor

thisbutinthe15yearssinceitcameintoforcenotonesuchdecisionhasbeenmade.

Thisasymmetryisparticularlyproblematicinthelightofthegrowthofprivatedamagesactions.

AfindingofaninfringementbytheCommissionisbindingonnationalcourtsandcanbeusedasa

basis for a ‘follow on’ action for damages in those courts. However, there are no corresponding

decisionsprovidingprotection(oratleastsomecomfort)theotherway.

InthiscontextthecallfromCommissionerVestager,andothernationalcompetitionauthorities(eg

inGermanyandtheNetherlands), tobringcasestothemiswelcome. It is incumbentonbusiness,

their advisors and NGOs concerned about climate change and sustainability to respond to that

invitation.Nationalauthoritiesshouldalsoletitbeknownthattheyarereadyandwillingtotakea

lookatinitiativestofightclimatechange.MoreauthoritiesshouldfollowtheexampleoftheDutch

andGermans.

(2) TestCasesinCourt.

To the extent that the competition authorities are unwilling to give positive guidance then

companiesandNGOsshouldlooktothecourtsforaffirmativerulings.Indeed,theEuropeancourts

have often been very good at looking at the treaties as a coherent whole and interpreting the

competitionprovisions accordingly (consider, for example cases such asAlbany, and FNVKunsten

discussedinsectionV.iiaboveandinn36).144

(3) PublicationofLegalOpinions.

Companies receiving,or lawyersgiving,positiveadviceabout initiatives to combat climatechange

(orother issuesconcerning theenvironmentoreconomic/social injustices) could seek topublicise

thefourrecommendationsoftheFairtradeFoundationpaperon‘CompetitionLawandSustainability.AStudyinto Industry Attitudes towards Multi-Stakeholder Collaboration in the UK Grocery Sector’ (2019), p 19<https://www.fairtrade.org.uk/Download.ashx?id=%7BEE9F8B75-8FFA-4E38-B87B-82BBE23A3D7C%7D>accessed19January2020.144FortheapproachoftheCJEUsee(n29).

53

thiswhereverclientconfidentialitypermits.Agoodexampleistheopiniononalivingwageprepared

fortheFairWearFoundation(referredtoinII.andn4).

(4) UpdatingCommissionGuidelinesandNotices.

Modernising guidelines to reflect the realities of a world where climate change is an existential

threat.Threeexampleswouldbe:

a. Including in the successor to the2010HorizontalGuidelines, a chapteron climate

change,sustainabilityandtheenvironment(tofacilitatecollaborativeactioninthese

areas);145

b. Updating the Exemption Guidelines-in particular to clarify, and hopefully expand,

therangeofconsumerstakenintoaccountwhenassessingwhetherconsumersget

a‘fairshareofthebenefits’whenlookingattheexemptioncriteriaofArticle101(3)

(seeV.iiiatCondition2).

c. Including in theMerger Remedies Notice, guidance on remedies to deal with the

collateraldamageofmergersthatmightotherwisebeblockedifsuchremediesare

notputinplace.146

(5) GuidanceonCompetitionAuthorities’Priorities.

Competition authorities should set out clear guidelines (or ‘enforcement priorities’) to help

companiesunderstandbetterwhenactionislikelytobetaken(andwhenitisnotlikelytobetaken)

inrelationtosustainabilityarrangements.147.Competitionauthoritiescanmakeitclearthattheywill

prioritise cases likely to have an impact on climate change.148 Governments can take a lead and

makeitclearthatitexpectsallgovernmentdepartmentsandauthoritiestoprioritiseactionagainst

climatechange.149

(6) BlockExemptions.

145Seefurther(n30)and(n5)andthediscussioninVonArticle101andthedarkcloudhangingovermuchneededcollaboration.146SeesectionVII.iii.147See,eg,theDutchAuthorityforConsumers&Markets,‘ACMSetsBasicPrinciplesforOversightofSustainabilityArrangements’(2016),<https://www.acm.nl/en/publications/publication/16726/ACM-sets-basic-principles-for-oversight-of-sustainability-arrangements>accessed19January2020.Theseare‘basedonthreebasicprinciples:(1)ACMwillnottakeactionagainstsustainabilityarrangementsthatenjoybroadsocialsupportifallpartiesinvolvedsuchasthegovernment,citizenrepresentatives,andbusinessesarepositiveaboutthearrangements;(2)ACMisabletoinitiateaninvestigationuponreceivingcomplaintsorindicationsregardingsustainabilityarrangements;(3)ACMhelpsfindquickandeffectivesolutions,shouldproblemsarise’.148TheauthorunderstandsthattheUK’scompetitionauthority(theCMA)isdiscussingmakingitclearinitsnextannualplanthatsustainabilitycasesareapriorityforthemThisisverywelcome.149IntheUKthiscouldbein“TheGovernment’sStrategicSteerToTheCompetitionAuthority”whichispublishedannually.

54

Ifguidelinesarenotsufficienttogeturgentcollaborativeactiongoing,thenblockexemptionsshould

beconsidered.Themostobviousexamplewouldbeanewblockexemptionforadefinedcategoryof

sustainability agreements (certainly encompassing environmental protection and climate change

issuesbutpossiblyotherissuesrelevanttoamoresustainablefuture).Weshouldnot,however,be

too ambitious. If we try to include too many things there is a danger that it is seen as ‘all too

difficult’150andnothingisincluded.Eitherthatorwhatisincludedistooconservativetobeusefulas

itistryingtocovertoomanyvariedthings.GiventheclimateemergencyIwouldadvocatealiberal

butclearfocusonarrangementstofightclimatechange.

(7) ChangestotheLaw.

Relatively minor changes to the law itself. It should not be necessary to change the EU treaties

themselves,butitisinevitablethatprovisionsofregulationsanddirectiveswillbecitedasareason

(orexcuse)forinaction.Thesemaythereforehavetobechanged.Onepossibleexamplewouldbeto

addareferencetotheenvironmentandclimatechangeasa‘legitimateinterest’inArticle21(4)of

theEUMR.151

(8) TreatyChanges.

Asalastresort,wecouldamendthetreatiestomakeevenclearertheneedtotakeenvironmental

andsustainabilityissuesintoaccountwhenapplyingthecompetitionprovisions(andperhapsaddan

expressreferencetoclimatechange).

Ifthese,andnodoubtothers,152changesaremadethencompetitionlawcanceasetobe‘partofthe

problem’andbecome‘partofthesolution’.

150SeesectionVIII.151SeesectionVII.iv.152 Nothing here is intended to detract from the need to introduce legislation on the environment,sustainabilityandclimatechange.Competitionlawisnopanaceaandcertainlynosubstituteforlegislativeandotheradministrativeaction.Indeed,whenit isclearthatcompetitionlawisnottheproblem(ortheanswer,evenafterall changesdiscussedhere), thiscanactasacatalyst for legislativeaction (anexamplebeing theEU’snewrulesonunfairtradingpractices–see(n87)).